Back in July 2008, just before all hell broke loose and the S&P was trading in the upper 1,200s, everyone's favorite permabull, JPM strategist famously reiterated his S&P 500 price target for the end of 2012: 1450. Two months later Lehman file...

Stocks surged (apart from AAPL) gloriously out of their super-narrow recent range, driven by recycled JPY rumors and some potential 'give' by the Republicans, and the rest of the risk-on complex tracked higher with it. Treasury yields pinged back to h...

[youtube https://www.youtube.com/watch?v=CaFZoOAnSuo&w=580&h=385]
Alex Jones talks with Martin Armstrong of Armstrong Economics about what he sees for the future and the coming collapse. Help us spread...

[youtube https://www.youtube.com/watch?v=Egb9RHvEjsM&w=580&h=385]
Alex Jones talks with Guardian journalist Charlie Skelton about his experiences at Bilderberg 2015. Help us spread the word about the liberty movement,...

Many of us have been following the massively high levels of radiation on the West Coast of America, following the earthquake and tsunami of 2011, which crippled the Fukushima nuclear plant in Japan, leading to multiple meltdowns and hundreds of tons of radioactive contaminated water being dumped into the Pacific Ocean, daily.In the video below, Alex Jones details efforts made to force the hand of the US government in monitoring these levels, leading to an arbitrary change into what was named as officially "safe" levels, and the report below highlights the cover up that has been underway, not just by the Japanese government but by governments along the West Coast as well.

By Susan Duclos Below is the entire Alex Jones show for May 13, 2014, where Jones covers a variety of subjects and has some blockbuster guests, including Wolfgang W. Halbig, a former Florida State Trooper and Executive Director of the Nationa...

Progressive-left media icon Jeremy Scahill told a caller to C-SPAN’s Book TV that Austin Texas talk show host Alex Jones is a “lunatic” and a significant detriment to “real journalism that journalists are doing.”

Scahill was asked who he thought represented “the most legimate … form of journalism”–Jones or Amy Goodman. “[I have] to be very careful about choosing my words here,” Scahill cautioned. The writer then proceeded to call Jones an “absolute, die-hard lunatic, and to even mention him in the same sentence as Amy Goodman is an incredible insult to Amy Goodman [sic].” Scahill continued,

Alex Jones has forwarded some of the most outrageous, ridiculous conspiracy theories about how the world works. And whatever good he might be doing in what he does is completely overshadowed by the fact that he is pushing outright lies and propaganda on a regular basis and I think that it ultimately subverts the importance of real journalism that independent journalists are doing on a regular basis by giving the impression that everyone’s running around wearing a tin foil hat.

The progressive author’s outburst begs the question, What exactly is “real journalism”? What are the characteristics of “alternative media”? Who has a legitimate claim to that mantle? And, what broader interests do attacks like these serve? This arguably has far less to do with journalistic legitimacy and a sincere regard for truth than it does with the less-apparent forces that seek to define political debate–and division.

Does money from philanthropic foundations predispose progressive media figures to cast aspersion on public gadflies who defy easy left/right categorization? Closely resembling typical attacks from the left, Scahill appears to have no option but to dismiss such alternative journalists and commentators as “conspiracy theorists,” or otherwise as wholly irrational. This renders such figures outside the parameters of what Scahill and his coterie perceive as legitimate debate. Nevermind the journalistic burden of proof that rightly accompanies such accusations.

My recent exchange facilitated by a “Facebook friend” with media critic Steve Rendall of the progressive media watchdog group Fairness and Accuracy in Reporting (FAIR) is illustrative of the vulnerability such individuals have when the conversation turns to the question of financing.

Rendall took issue with an article I wrote specifically addressing the relationship between foundation funding and the independence of news media professing to be “alternative” or “radical.” Rendall argued that I was not placing Noam Chomsky in proper context, which I viewed as a red herring to my original premise.

I proceeded to point out how FAIR was the recipient of $3.5 million in funding between 2007 and 2011, and that this should be made note of, particularly in light of my article’s subject matter. A portion of FAIR’s income stream came from major foundations, including Ford.

At the suggestion of FAIR’s funding, Rendall turned hostile, noting that if it were not for such foundation-funded entities the “US left would be nearly non-existent.”

I don’t hide who I am. Anyone who cares, can look me up. And FAIR is a 501c3, or not-for-profit organization. Our status and major donations are a matter of public record. So you can stop pretending like you’ve done some kind of deep sleuthing.

Most of our money comes from individual contributors, but we get some foundation money. I wish we got more. The US left would be nearly non-existent without non-profits like Pacifica, Democracy Now!, and many others. (My emphasis.)

But seriously James, Global Research? Really? What’s the matter, Infowars or Michael Ruppert didn’t have any “dirt” on FAIR?

Poorly-reasoned and even vitriolic remarks like Scahill’s and Rendall’s must be placed in a broader context. Are they really speaking to their readerships? Certainly to some degree, for many of their adherents see themselves as similarly partisan in terms of social justice and the environment-related issues.

Yet such statements are also no doubt directed toward parties outside the tent–those that provide them with the financial means to enact their projects–and perhaps even motivated by an intelligence community that has an established history in promoting such confusion and disinformation to thwart serious challenges to the political-economic status quo.

The greatest challenge to that status quo might be waged once those on the “left” and “right” move beyond their politics of imagined opinion and allegiance toward a common understanding of the oppressive forces arrayed against them.

https://soundcloud.com/davidcnswanson/talk-nation-radio-ann-jones-on
Ann Jones discusses her new book, They Were Soldiers: How the Wounded Return from America's Wars -- The Untold Story. Jones is an independent journalist and photographer and t...

Children who participate in Head Start programs affected by the government shutdown protesting their Head Start centers being shuddered

On a damp Friday morning 11 days into the government shutdown, a “few dozen” truckers took to the Capital Beltway in a demonstration with the Twitter hashtag #T2SDA (Truckers to Shut Down America). They wanted to tell lawmakers they were angry, launch an impeachment campaign against the president, and pressure Congress to end itself.

They were on a “ride for the Constitution,” protesting big government and yet the opinion polls were clear. In fact, the numbers were stunning. One after another, they showed that Americans opposed the shutdown and were hurting because of it. At that moment, according to those polls, nearly one in three Americans said they felt personally affected not by too much government, but by too little, by the sudden freeze in critical services.

In reality, that government shutdown was partial and selective. Paychecks, for example, kept flowing to the very lawmakers who most fervently supported it, while the plush congressional gym with its heated pool, paddleball courts, and flat-screen televisions remained open. That’s because “essential” services continued, even as “nonessential” ones ceased. And it turned out that whether the services you cared about were essential or not was a matter of just who got to do the defining. In that distinction between what was necessary and what wasn’t, it was easy enough to spot the values of the people’s representatives. And what we saw was gut-wrenching. Stomach-churning.

Prioritized above all else were, of course, “national security” activities, deemed beyond essential under the banner of “protecting life and property.” Surveillance at the National Security Agency, for instance, continued, uninterrupted, though it was liberated from its obviously nonessential and, even in the best-funded of times, minimal responsibility to disclose those activities under the Freedom of Information Act. Such disclosure was judged superfluous in a shutdown era, while spying on Americans (not to speak of Brazilians, Mexicans, Europeans, Indians, and others around the planet) was deemed indispensible.

Then there was the carefully orchestrated Special Operations Forces mission in Libya to capture a terror suspect off the streets of Tripoli in broad daylight, proving that in a shutdown period, the US military wasn’t about to shut off the lights. And don’t forget the nighttime landing of a Navy SEAL team in Somalia in an unsuccessful attempt to capture a different terrorist target. These activities were deemed essential to national survival, even though the chances of an American being killed in a terrorist attack are, at the moment, estimated at around one in 20 million. Remember that number, because we’ll come back to it.

Indeed, only for a brief moment did the shutdown reduce the gusher of taxpayer dollars, billions and billions of them, into the Pentagon’s coffers. After a couple days in which civilian Defense Department employees were furloughed, Secretary of Defense Chuck Hagel announced that 90% of them could resume work because they “contribute to morale, well-being, capabilities, and readiness of service members.” This from the crew that, according to Foreign Policy, went on a jaw-dropping, morale-boosting $5 billion spending spree on the eve of the shutdown to exhaust any remaining cash from the closing fiscal year, buying spy satellites, drones, infrared cameras and, yes, a $9 million sparkling new gym for the Air Force Academy, replete with CrossFit space and a “television studio.”

Furloughing children

Then there were the nonessential activities.

In Arkansas, for instance, federal funds for infant formula to feed 2,000 at-risk newborn babies were in jeopardy, as were 85,000 meals for needy children in that state. Nutrition for low-income kids was considered nonessential even though one in four children in this country doesn’t have consistent access to nutritious food, and medical research makes it clear that improper nutrition stunts brain architecture in the young, forever affecting their ability to learn and interact socially. Things got so bad that a Texas couple dug into their own reserves to keep the program running in six states.

If children in need were “furloughed,” so were abused women. Across the country, domestic violence shelters struggled to provide services as federal funds were cut off. Some shelters raised spare change from their communities to keep the doors open. According to estimates, as many as six million women each year are victims of domestic violence. On average in this country, three women are murdered by an intimate partner every day.

But funding for domestic violence protection: nonessential.

Funds for early childhood education, too, were shut off. Seven thousand low-income kids from 11 states were turned away. Their “head start” was obviously less than essential, even though evidence shows that early education for at-risk children is the best way to help them catch up with their wealthier peers in cognition and adds to their odds of staying out of prison in later life.

The National Institutes of Health (NIH) wasn’t accepting new patients because of the shutdown. Typically 200 new patients arrive every week for experimental treatment. On average around 30 of them are children, 10 of whom have cancer.

Cancer, in fact, is the leading cause of death among children ages one to 14. But treatment for them didn’t qualify as essential. Unlike fighting terrorism -- remember the less-likely-than-being-struck-by-lightning odds of one in 20 million -- treating kids with cancer didn’t make the cut as “protecting life and property.”

A father of two young girls in the town of Eliot, Maine, said to a National Priorities Project staffer in disbelief, “If even one kid can’t get cancer treatment, isn’t that enough to end the shutdown?”

Let this be the last time we find ourselves on the wrong side of that question. Because every day we as a nation allowed our lawmakers to keep the government closed was a day in which we as a people were complicit in replying "no."

Let this be the last time that a couple dozen Tea Party truckers are the only ones angry enough to take to the streets. The vast majority of Americans, whatever their anger when faced with pollsters or TV news interviewers, took this shutdown lying down, perhaps imagining -- incorrectly -- that they were powerless.

Let this be the last time we allow ourselves such lethargy. After all, there are 243 million Americans old enough to vote, which means 243 million ways to demand a government that serves the people instead of shutting them out. Keep in mind that in the office of every member of Congress is a staffer tracking constituent calls. And what those constituents say actually matters in how legislators vote. They know that a flood of angry telephone calls from their home districts means legions of angry constituents ready to turn out in the next election and possibly turn them out of office.

Shutting down Taxes

Americans, however, didn’t get angry enough to demand an end to the shutdown, perhaps at least in part because poisonous rhetoric had convinced many that the government was nothing more than a big, wasteful behemoth -- until, at least, it shut down on them. Think of these last weeks as a vivid lesson in reality, in the ways that every American is intimately connected to government services, whether by enjoying a safe food and water supply and Interstate highways, or through Meals on Wheels, cancer treatment, or tuition assistance for higher education, not to speak of Social Security checks and Medicare.

Deep in the politics of the shutdown lies another truth: that it was all about taxes -- about, to be more specific, the unwillingness of the Republicans to raise a penny of new tax revenue, even by closing egregious loopholes that give billions away to the richest Americans. Simply shutting down the tax break on capital gains and dividends (at $83 billion annually) would be more than enough to triple funding for Head Start, domestic violence protection, the Women, Infants, and Children nutrition program, and cancer care at the NIH.

So let this be the last time we as a nation let our elected officials cut nutrition assistance for vulnerable children at the same moment that they protect deep tax loopholes for the wealthy and corporations. And let’s call recent events in Washington just what they are: breathtaking greed paired with a callous lack of concern for the most vulnerable among us.

It’s time to create a roll of dishonor and call out the lawmakers who supported the shutdown, knowing just what was involved: Mark Meadows (North Carolina, 11th congressional district), Walter Jones (NC-3), Rodney Davis (IL-13), John Mica (FL-7), Daniel Webster (FL-10), Jim Gerlach (PA-6), Justin Amash (MI-3). And that’s just to start a list that seems never to end.

Such representatives obviously should not be reelected, but we need a long-haul strategy as well -- the unsexy yet necessary systemic set of changes that will ensure our government truly represents the people. Gerrymandered district lines must be redrawn fairly, which means that citizens in each state will have to wrest control over redistricting from biased political bodies. California has set the example. Then the big money must be pulled out of political campaigns, so that our politicians learn how to be something other than talented (and beholden) fundraisers.

Finally, we must build, person by person, an electorate that’s informed enough about how our government is supposed to work to fulfill its responsibility in this democracy: to ensure, that is, that it operates in the best interests of the broadest diversity of Americans.

Ahead will be long battles. They’ll take years. And it will be worth it if, in the end, we can give the right answer to that father who asked a question that should have been on everyone’s lips.

The budget brinkmanship has cost the world's largest economy billions of dollars - as well as the trust of investors around the globe. And it also sparked calls to de-americanize the world economy. For more, RT talks to Pepe Escobar, Asia Times Online roving correspondent.

US President Barack Obama has signed legislation passed by Congress Wednesday to temporarily lift the debt ceiling and end the government shutdown, averting the threat of default just hours before the October 17 deadline.

The legislation funds the government through to January 15 and lifts the $16.7 trillion debt ceiling until February 7. The White House budget director, Sylvia Mathews Burwell, said she has issued a directive to all government employees to return to work.

The 16-day budget crisis has subtracted an estimated $24 billion in from the American economy and triggered a flurry of criticism from major foreign lenders and domestic business captains.

As promised, Obama signed the legislation shortly after it was passed in the House of Representatives.

As indicated before the US Senate vote, Republican House Speaker John Boehner did not block the fiscal deal from moving on, and it passed by a vote of 285-144 in the lower chamber.

The measure was supported by every Democratic member of the House, but was rejected by a sizeable portion of Boehner’s GOP caucus.

Conservative Republicans were nearly unanimous in their opposition to the plan, as the federal health care law – the Affordable Care Act, or Obamacare – they so object to will go virtually unscathed after all.

The Senate approved the proposal by a vote of 81-18 earlier on Wednesday evening.

Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell spent previous days constructing a deal as the House failed to come to an agreement on a proposal Tuesday.

“This compromise we reached will provide our economy with the stability it desperately needs. It’s never easy for two sides to reach consensus. It’s really hard, sometimes harder than others. This time was really hard,” Reid said ahead of the vote. “The country came to the brink of a disaster. But in the end, political adversaries set aside their differences and disagreement to prevent that disaster."

Republicans Senators Ted Cruz, Rand Paul and Marco Rubio were among the 18 'nay' votes in the Senate.

"This is a terrible deal," said Senator Ted Cruz on the Senate floor before the vote. "This deal embodies everything about the Washington establishment that frustrates the American people."

President Obama said in a statement after the Senate vote that Washington must begin to gain back the trust of voters given that more confrontations on debt, governmental budgeting, and other issues await.

"Hopefully next time, it won't be in the eleventh hour. We've got to get out of the habit of governing by crisis,” Obama said.

The US Treasury’s authority to borrow money to pay down US debt obligations was scheduled to end Thursday, October 17. With no full spending bill from Congress, many government operations have been on hold since October 1.

The 16-day government shutdown has cost the US $1.7 billion per week in lost economic output, according to a study by IHS Global Insight, a Massachusetts-based research firm. The S&P ratings agency declared Wednesday the shutdown has subtracted $24 billion from the US economy, cutting 0.6 percent from the fourth quarter GDP growth.

Major US creditors like China - which holds $1.3 trillion in US Treasuries - have openly discussed “de-Americanizing” as the crises-hopping US government has become increasingly volatile to the world economy. China has introduced a so-called “haircut," or a discount, on the value of US Treasuries held as collateral against futures trades.

Developing and developed nations are equally concerned, and institutions like the World Bank and the International Monetary Fund (IMF) have issued several warnings.

Some US business leaders are too voicing their discontent with Washington’s political turmoil.

"Most CEOs I speak to in the United States say they're seeing a slowdown in business because of this," Laurence Fink, the CEO of giant asset manager BlackRock Inc, told Reuters in an interview on Wednesday.

"I was on a conference call with many of them, and I heard across the board, a slowdown from the American consumer because of this narrative, so it's having an impact on our economy already – and it's going to have an impact on job creation at a time when we need more job creation," he added.

Upon news of a deal, the Dow Jones Industrial Average shot up by more than 200 points.

“Investors are relieved that it looks like we’re not going to go over the cliff,” Ben Hart, a research analyst at the Pennsylvania-based Haverford Trust Co., told Bloomberg News. “It takes the worst case scenario off the table.”

The Senate deal will provide back pay to furloughed government workers and will allow the US Treasury to pay US debt bills should Congress not come to an agreement on the ceiling by February 7.

In addition, the deal comes with an income verification requirement for anyone receiving health insurance subsidies under the Affordable Care Act.

On a damp Friday morning 11 days into the government shutdown, a “few dozen” truckers took to the Capital Beltway in a demonstration with the Twitter hashtag #T2SDA (Truckers to Shut Down America). They wanted to tell lawmakers they were angry, launch an impeachment campaign against the president, and pressure Congress to end itself.

They were on a “ride for the Constitution,” protesting big government and yet the opinion polls were clear. In fact, the numbers were stunning. One after another, they showed that Americans opposed the shutdown and were hurting because of it. At that moment, according to those polls, nearly one in three Americans said they felt personally affected not by too much government, but by too little, by the sudden freeze in critical services.

In reality, that government shutdown was partial and selective. Paychecks, for example, kept flowing to the very lawmakers who most fervently supported it, while the plush congressional gym with its heated pool, paddleball courts, and flat-screen televisions remained open. That’s because “essential” services continued, even as “nonessential” ones ceased. And it turned out that whether the services you cared about were essential or not was a matter of just who got to do the defining. In that distinction between what was necessary and what wasn’t, it was easy enough to spot the values of the people’s representatives. And what we saw was gut-wrenching. Stomach-churning.

Prioritized above all else were, of course, “national security” activities, deemed beyond essential under the banner of “protecting life and property.” Surveillance at the National Security Agency, for instance, continued, uninterrupted, though it was liberated from its obviously nonessential and, even in the best-funded of times, minimal responsibility to disclose those activities under the Freedom of Information Act. Such disclosure was judged superfluous in a shutdown era, while spying on Americans (not to speak of Brazilians, Mexicans, Europeans, Indians, and others around the planet) was deemed indispensible.

Then there was the carefully orchestrated Special Operations Forces mission in Libya to capture a terror suspect off the streets of Tripoli in broad daylight, proving that in a shutdown period, the U.S. military wasn’t about to shut off the lights. And don’t forget the nighttime landing of a Navy SEAL team in Somalia in an unsuccessful attempt to capture a different terrorist target. These activities were deemed essential to national survival, even though the chances of an American being killed in a terrorist attack are, at the moment, estimated at around one in 20 million. Remember that number, because we’ll come back to it.

Indeed, only for a brief moment did the shutdown reduce the gusher of taxpayer dollars, billions and billions of them, into the Pentagon’s coffers. After a couple days in which civilian Defense Department employees were furloughed, Secretary of Defense Chuck Hagel announced that 90% of them could resume work because they “contribute to morale, well-being, capabilities, and readiness of service members.” This from the crew that, according to Foreign Policy, went on a jaw-dropping, morale-boosting $5 billion spending spree on the eve of the shutdown to exhaust any remaining cash from the closing fiscal year, buying spy satellites, drones, infrared cameras and, yes, a $9 million sparkling new gym for the Air Force Academy, replete with CrossFit space and a “television studio.”

Furloughing Children

Then there were the nonessential activities.

In Arkansas, for instance, federal funds for infant formula to feed 2,000 at-risk newborn babies were in jeopardy, as were 85,000 meals for needy children in that state. Nutrition for low-income kids was considered nonessential even though one in four children in this country doesn’t have consistent access to nutritious food, and medical research makes it clear that improper nutrition stunts brain architecture in the young, forever affecting their ability to learn and interact socially. Things got so bad that a Texas couple dug into their own reserves to keep the program running in six states.

If children in need were “furloughed,” so were abused women. Across the country, domestic violence shelters struggled to provide services as federal funds were cut off. Some shelters raised spare change from their communities to keep the doors open. According to estimates, as many as six million women each year are victims of domestic violence. On average in this country, three women are murdered by an intimate partner every day.

But funding for domestic violence protection: nonessential.

Funds for early childhood education, too, were shut off. Seven thousand low-income kids from 11 states were turned away. Their “head start” was obviously less than essential, even though evidence shows that early education for at-risk children is the best way to help them catch up with their wealthier peers in cognition and adds to their odds of staying out of prison in later life.

The National Institutes of Health (NIH) wasn’t accepting new patients because of the shutdown. Typically 200 new patients arrive every week for experimental treatment. On average around 30 of them are children, 10 of whom have cancer.

Cancer, in fact, is the leading cause of death among children ages one to 14. But treatment for them didn’t qualify as essential. Unlike fighting terrorism -- remember the less-likely-than-being-struck-by-lightning odds of one in 20 million -- treating kids with cancer didn’t make the cut as “protecting life and property.”

A father of two young girls in the town of Eliot, Maine, said to a National Priorities Project staffer in disbelief, “If even one kid can’t get cancer treatment, isn’t that enough to end the shutdown?”

Let this be the last time we find ourselves on the wrong side of that question. Because every day we as a nation allowed our lawmakers to keep the government closed was a day in which we as a people were complicit in replying "no."

Let this be the last time that a couple dozen Tea Party truckers are the only ones angry enough to take to the streets. The vast majority of Americans, whatever their anger when faced with pollsters or TV news interviewers, took this shutdown lying down, perhaps imagining -- incorrectly -- that they were powerless.

Let this be the last time we allow ourselves such lethargy. After all, there are 243 million Americans old enough to vote, which means 243 million ways to demand a government that serves the people instead of shutting them out. Keep in mind that in the office of every member of Congress is a staffer tracking constituent calls. And what those constituents say actually matters in how legislators vote. They know that a flood of angry telephone calls from their home districts means legions of angry constituents ready to turn out in the next election and possibly turn them out of office.

Shutting Down Taxes

Americans, however, didn’t get angry enough to demand an end to the shutdown, perhaps at least in part because poisonous rhetoric had convinced many that the government was nothing more than a big, wasteful behemoth -- until, at least, it shut down on them. Think of these last weeks as a vivid lesson in reality, in the ways that every American is intimately connected to government services, whether by enjoying a safe food and water supply and Interstate highways, or through Meals on Wheels, cancer treatment, or tuition assistance for higher education, not to speak of Social Security checks and Medicare.

Deep in the politics of the shutdown lies another truth: that it was all about taxes -- about, to be more specific, the unwillingness of the Republicans to raise a penny of new tax revenue, even by closing egregious loopholes that give billions away to the richest Americans. Simply shutting down the tax break on capital gains and dividends (at $83 billion annually) would be more than enough to triple funding for Head Start, domestic violence protection, the Women, Infants, and Children nutrition program, and cancer care at the NIH.

So let this be the last time we as a nation let our elected officials cut nutrition assistance for vulnerable children at the same moment that they protect deep tax loopholes for the wealthy and corporations. And let’s call recent events in Washington just what they are: breathtaking greed paired with a callous lack of concern for the most vulnerable among us.

It’s time to create a roll of dishonor and call out the lawmakers who supported the shutdown, knowing just what was involved: Mark Meadows (North Carolina, 11th congressional district), Walter Jones (NC-3), Rodney Davis (IL-13), John Mica (FL-7), Daniel Webster (FL-10), Jim Gerlach (PA-6), Justin Amash (MI-3). And that’s just to start a list that seems never to end.

Such representatives obviously should not be reelected, but we need a long-haul strategy as well -- the unsexy yet necessary systemic set of changes that will ensure our government truly represents the people. Gerrymandered district lines must be redrawn fairly, which means that citizens in each state will have to wrest control over redistricting from biased political bodies. California has set the example. Then the big money must be pulled out of political campaigns, so that our politicians learn how to be something other than talented (and beholden) fundraisers.

Finally, we must build, person by person, an electorate that’s informed enough about how our government is supposed to work to fulfill its responsibility in this democracy: to ensure, that is, that it operates in the best interests of the broadest diversity of Americans.

Ahead will be long battles. They’ll take years. And it will be worth it if, in the end, we can give the right answer to that father who asked a question that should have been on everyone’s lips.

Picture this. A man, armored in tattoos, bursts into a living room not his own. He confronts an enemy. He barks orders. He throws that enemy into a chair. Then against a wall. He plants himself in the middle of the room, feet widespread, fists clenched, muscles straining, face contorted in a scream of rage. The tendons in his neck are taut with the intensity of his terrifying performance. He chases the enemy to the next room, stopping escape with a quick grab and thrust and body block that pins the enemy, bent back, against a counter. He shouts more orders: his enemy can go with him to the basement for a “private talk,” or be beaten to a pulp right here. Then he wraps his fingers around the neck of his enemy and begins to choke her.A US Marine kicks in a locked door during a search of the village of Khabargho, Afghanistan in this photo from 2004. (Source: Wikimedia commons)

No, that invader isn’t an American soldier leading a night raid on an Afghan village, nor is the enemy an anonymous Afghan householder. This combat warrior is just a guy in Ohio named Shane. He’s doing what so many men find exhilarating: disciplining his girlfriend with a heavy dose of the violence we render harmless by calling it “domestic.”

It’s easy to figure out from a few basic facts that Shane is a skilled predator. Why else does a 31-year-old man lavish attention on a pretty 19-year-old with two children (ages four and two, the latter an equally pretty and potentially targeted little female)? And what more vulnerable girlfriend could he find than this one, named Maggie: a neglected young woman, still a teenager, who for two years had been raising her kids on her own while her husband fought a war in Afghanistan? That war had broken the family apart, leaving Maggie with no financial support and more alone than ever.

But the way Shane assaulted Maggie, he might just as well have been a night-raiding soldier terrorizing an Afghan civilian family in pursuit of some dangerous Talib, real or imagined. For all we know, Maggie’s estranged husband/soldier might have acted in the same way in some Afghan living room and not only been paid but also honored for it. The basic behavior is quite alike: an overwhelming display of superior force. The tactics: shock and awe. The goal: to control the behavior, the very life, of the designated target. The mind set: a sense of entitlement when it comes to determining the fate of a subhuman creature. The dark side: the fear and brutal rage of a scared loser who inflicts his miserable self on others.

As for that designated enemy, just as American exceptionalism asserts the superiority of the United States over all other countries and cultures on Earth, and even over the laws that govern international relations, misogyny -- which seems to inform so much in the United States these days, from military boot camp to the Oscars to full frontal political assaults on a woman’s right to control her own body -- assures even the most pathetic guys like Shane of their innate superiority over some “thing” usually addressed with multiple obscenities.

When tyranny and violence are practiced on a grand scale in foreign lands, the practice also intensifies at home.

Since 9/11, the further militarization of our already militarized culture has reached new levels. Official America, as embodied in our political system and national security state, now seems to be thoroughly masculine, paranoid, quarrelsome, secretive, greedy, aggressive, and violent. Readers familiar with “domestic violence” will recognize those traits as equally descriptive of the average American wife beater: scared but angry and aggressive, and feeling absolutely entitled to control something, whether it’s just a woman, or a small wretched country like Afghanistan.

Connecting the Dots

It was John Stuart Mill, writing in the nineteenth century, who connected the dots between “domestic” and international violence. But he didn’t use our absurdly gender-neutral, pale gray term “domestic violence.” He called it “wife torture” or “atrocity,” and he recognized that torture and atrocity are much the same, no matter where they take place -- whether today in Guantanamo Bay, Cuba, Wardak Province, Afghanistan, or a bedroom or basement in Ohio. Arguing in 1869 against the subjection of women, Mill wrote that the Englishman’s habit of household tyranny and “wife torture” established the pattern and practice for his foreign policy. The tyrant at home becomes the tyrant at war. Home is the training ground for the big games played overseas.

Mill believed that, in early times, strong men had used force to enslave women and the majority of their fellow men. By the nineteenth century, however, the “law of the strongest” seemed to him to have been “abandoned” -- in England at least -- “as the regulating principle of the world’s affairs.” Slavery had been renounced. Only in the household did it continue to be practiced, though wives were no longer openly enslaved but merely “subjected” to their husbands. This subjection, Mill said, was the last vestige of the archaic “law of the strongest,” and must inevitably fade away as reasonable men recognized its barbarity and injustice. Of his own time, he wrote that “nobody professes” the law of the strongest, and “as regards most of the relations between human beings, nobody is permitted to practice it.”

Well, even a feminist may not be right about everything. Times often change for the worse, and rarely has the law of the strongest been more popular than it is in the United States today. Routinely now we hear congressmen declare that the U.S. is the greatest nation in the world because it is the greatest military power in history, just as presidents now regularly insist that the U.S. military is “the finest fighting force in the history of the world.” Never mind that it rarely wins a war. Few here question that primitive standard -- the law of the strongest -- as the measure of this America’s dwindling “civilization.”

The War Against Women

Mill, however, was right about the larger point: that tyranny at home is the model for tyranny abroad. What he perhaps didn’t see was the perfect reciprocity of the relationship that perpetuates the law of the strongest both in the home and far away.

When tyranny and violence are practiced on a grand scale in foreign lands, the practice also intensifies at home. As American militarism went into overdrive after 9/11, it validated violence against women here, where Republicans held up reauthorization of the Violence Against Women Act (first passed in 1994), and celebrities who publicly assaulted their girlfriends faced no consequences other than a deluge of sympathetic girl-fan tweets.

America’s invasions abroad also validated violence within the U.S. military itself. An estimated 19,000 women soldiers were sexually assaulted in 2011; and an unknown number have been murdered by fellow soldiers who were, in many cases, their husbands or boyfriends. A great deal of violence against women in the military, from rape to murder, has been documented, only to be casually covered up by the chain of command.

Violence against civilian women here at home, on the other hand, may not be reported or tallied at all, so the full extent of it escapes notice. Men prefer to maintain the historical fiction that violence in the home is a private matter, properly and legally concealed behind a “curtain.” In this way is male impunity and tyranny maintained.

Women cling to a fiction of our own: that we are much more “equal” than we are. Instead of confronting male violence, we still prefer to lay the blame for it on individual women and girls who fall victim to it -- as if they had volunteered. But then, how to explain the dissonant fact that at least one of every three female American soldiers is sexually assaulted by a male “superior”? Surely that’s not what American women had in mind when they signed up for the Marines or for Air Force flight training. In fact, lots of teenage girls volunteer for the military precisely to escape violence and sexual abuse in their childhood homes or streets.

Don’t get me wrong, military men are neither alone nor out of the ordinary in terrorizing women. The broader American war against women has intensified on many fronts here at home, right along with our wars abroad. Those foreign wars have killed uncounted thousands of civilians, many of them women and children, which could make the private battles of domestic warriors like Shane here in the U.S. seem puny by comparison. But it would be a mistake to underestimate the firepower of the Shanes of our American world. The statistics tell us that a legal handgun has been the most popular means of dispatching a wife, but when it comes to girlfriends, guys really get off on beating them to death.

Some 3,073 people were killed in the terrorist attacks on the United States on 9/11. Between that day and June 6, 2012, 6,488 U.S. soldiers were killed in combat in Iraq and Afghanistan, bringing the death toll for America’s war on terror at home and abroad to 9,561. During the same period, 11,766 women were murdered in the United States by their husbands or boyfriends, both military and civilian. The greater number of women killed here at home is a measure of the scope and the furious intensity of the war against women, a war that threatens to continue long after the misconceived war on terror is history.

Getting the Picture

Think about Shane, standing there in a nondescript living room in Ohio screaming his head off like a little child who wants what he wants when he wants it. Reportedly, he was trying to be a good guy and make a career as a singer in a Christian rock band. But like the combat soldier in a foreign war who is modeled after him, he uses violence to hold his life together and accomplish his mission.

We know about Shane only because there happened to be a photographer on the scene. Sara Naomi Lewkowicz had chosen to document the story of Shane and his girlfriend Maggie out of sympathy for his situation as an ex-con, recently released from prison yet not free of the stigma attached to a man who had done time. Then, one night, there he was in the living room throwing Maggie around, and Lewkowicz did what any good combat photographer would do as a witness to history: she kept shooting. That action alone was a kind of intervention and may have saved Maggie’s life.

In the midst of the violence, Lewkowicz also dared to snatch from Shane’s pocket her own cell phone, which he had borrowed earlier. It’s unclear whether she passed the phone to someone else or made the 911 call herself. The police arrested Shane, and a smart policewoman told Maggie: “You know, he’s not going to stop. They never stop. They usually stop when they kill you.”

Maggie did the right thing. She gave the police a statement. Shane is back in prison. And Lewkowicz’s remarkable photographs were posted online on February 27th at Time magazine’s website feature Lightbox under the heading “Photographer As Witness: A Portrait of Domestic Violence.”

The photos are remarkable because the photographer is very good and the subject of her attention is so rarely caught on camera. Unlike warfare covered in Iraq and Afghanistan by embedded combat photographers, wife torture takes place mostly behind closed doors, unannounced and unrecorded. The first photographs of wife torture to appear in the U.S. were Donna Ferrato’s now iconic images of violence against women at home.

Like Lewkowicz, Ferrato came upon wife torture by chance; she was documenting a marriage in 1980 when the happy husband chose to beat up his wife. Yet so reluctant were photo editors to pull aside the curtain of domestic privacy that even after Ferrato became a Life photographer in 1984, pursuing the same subject, nobody, including Life, wanted to publish the shocking images she produced.

In 1986, six years after she witnessed that first assault, some of her photographs of violence against women in the home were published in the Philadelphia Inquirer, and brought her the 1987 Robert F. Kennedy journalism award “for outstanding coverage of the problems of the disadvantaged.” In 1991, Aperture, the publisher of distinguished photography books, brought out Ferrato’s eye-opening body of work as Living with the Enemy (for which I wrote an introduction). Since then, the photos have been widely reproduced. Timeused a Ferrato image on its cover in 1994, when the murder of Nicole Brown Simpson briefly drew attention to what the magazine called “the epidemic of domestic abuse” and Lightbox featured a small retrospective of her domestic violence work on June 27, 2012.

Ferrato herself started a foundation, offering her work to women’s groups across the country to exhibit at fundraisers for local shelters and services. Those photo exhibitions also helped raise consciousness across America and certainly contributed to smarter, less misogynistic police procedures of the kind that put Shane back in jail.

Ferrato’s photos were incontrovertible evidence of the violence in our homes, rarely acknowledged and never before so plainly seen. Yet until February 27th, when with Ferrato’s help, Sara Naomi Lewkowicz’s photos were posted on Lightbox only two months after they were taken, Ferrato’s photos were all we had. We needed more. So there was every reason for Lewkowicz’s work to be greeted with acclaim by photographers and women everywhere.

Instead, in more than 1,700 comments posted at Lightbox, photographer Lewkowicz was mainly castigated for things like not dropping her camera and taking care to get Maggie’s distraught two-year-old daughter out of the room or singlehandedly stopping the assault. (Need it be said that stopping combat is not the job of combat photographers?) When Maggie refused, Shane began grabbing her by the face and neck, choking her. "You can either get beat up here, or we can go talk alone," he said. "Your choice." (Photo: Sara Naomi Lewkowicz)

Maggie, the victim of this felonious assault, was also mercilessly denounced: for going out with Shane in the first place, for failing to foresee his violence, for “cheating” on her already estranged husband fighting in Afghanistan, and inexplicably for being a “perpetrator.” Reviewing the commentary for the Columbia Journalism Review, Jina Moore concluded, “[T]here’s one thing all the critics seem to agree on: The only adult in the house not responsible for the violence is the man committing it.”

They Only Stop When They Kill You

Viewers of these photographs -- photos that accurately reflect the daily violence so many women face -- seem to find it easy to ignore, or even praise, the raging man behind it all. So, too, do so many find it convenient to ignore the violence that America’s warriors abroad inflict under orders on a mass scale upon women and children in war zones.

The U.S. invasion and occupation of Iraq had the effect of displacing millions from their homes within the country or driving them into exile in foreign lands. Rates of rape and atrocity were staggering, as I learned firsthand when in 2008-2009 I spent time in Syria, Jordan, and Lebanon talking with Iraqi refugees. In addition, those women who remain in Iraq now live under the rule of conservative Islamists, heavily influenced by Iran. Under the former secular regime, Iraqi women were considered the most advanced in the Arab world; today, they say they have been set back a century.

In Afghanistan, too, while Americans take credit for putting women back in the workplace and girls in school, untold thousands of women and children have been displaced internally, many to makeshift camps on the outskirts of Kabul where 17 children froze to death last January. The U.N. reported 2,754 civilian deaths and 4,805 civilian injuries as a result of the war in 2012, the majority of them women and children. In a country without a state capable of counting bodies, these are undoubtedly significant undercounts. A U.N. official said, “It is the tragic reality that most Afghan women and girls were killed or injured while engaging in their everyday activities.” Thousands of women in Afghan cities have been forced into survival sex, as were Iraqi women who fled as refugees to Beirut and particularly Damascus.

That’s what male violence is meant to do to women. The enemy. War itself is a kind of screaming tattooed man, standing in the middle of a room -- or another country -- asserting the law of the strongest. It’s like a reset button on history that almost invariably ensures women will find themselves subjected to men in ever more terrible ways. It’s one more thing that, to a certain kind of man, makes going to war, like good old-fashioned wife torture, so exciting and so much fun.

Ann Jones, writer and photographer, is the author of seven previous books, including War Is Not Over When It's Over, Kabul in Winter, Women Who Kill, and Next Time She'll Be Dead. Since 2001, Jones has worked with women in conflict and post-conflict zones, principally Afghanistan, and reported on their concerns. An authority on violence against women, she has served as a gender adviser to the United Nations. Her work has appeared in numerous publications, including The New York Times and The Nation. For more information, visit her website.

News of another consecutive contraction in Europe for Q4 2012 depressed major indices around the world on Thursday, as investors grow increasingly doubtful about a recovery in 2013.

The eurozone’s GDP contracted 0.9% year-on-year during the last quarter of 2012, while most expected it to lose only 0.7%. “This fall turned out to be a maximum one since 1Q 2009, when the world financial crisis was at its full swing. Given this the perspective, a further recovery in 2013 becomes more uncertain,” Investcafe analyst Darya Pichugina wrote in an email.

In quarter-on-quarter terms, the eurozone GDP shrank 0.6% in Q4 2012, marking the third consecutive quarter of declining growth.

Russian stocks ended Thursday trading in the red. The RTS lost 1.51% to 1,588.31 and the MICEX was down 1.22% to 1,519.22.

The contraction in Europe’s biggest economies such as Germany and France “acted as a reminder that no one is immune to the eurozone debt crisis,” said Angus Campbell, head of market analysis at Capital Spreads.

Germany’s GDP fell 0.6% quarter-on-quarter Q4 2012, but in annual terms the economy grew 0.4%. In France, the GDP was down 0.3% both from the last quarter and from a year earlier.

European markets finished broadly lower on Thursday, with shares in Germany leading the slide. The DAX lost 1.05%, while France's CAC 40 fell 0.78% and London's FTSE 100 slipped 0.50%.

On Wall Street, major indices traded mixed. The Dow Jones Industrial Average lost 0.1%, while the S&P 500 and Nasdaq grew 0.1%.

Better-than-expected figures from the US labor market almost lost their allure in the wake of the disappointing news from Europe. The Labor Department reported that the number of people in the US filing for first-time unemployment claims fell by 27,000 to 341,000 in the most recent week. Economists had predicted 365,000 claims.

Japanese shares are lower today as the Nikkei 225 fell 1.60%. Stock markets in Hong Kong and Shanghai are closed.

A live lecture by anti-NWO blogger and radio show host Ben Emlyn-Jones at the New Horizons conference at St Annes, Lancashire on the 4th of February 2013. Entitled:Â Truth and Drugs donâ€™t Go Together.

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The following is an excerpt from the new e-book FilmSuck USA by Eileen Jones (Amazon Digital Services, Inc 2013).

That loud sucking noise you hear is American cinema going down the drain. We've been listening to that slow slurping gurgle for a long time now, and are used to it. Still, sometimes you might wonder how American cinema, which was once the best in the world, wound up circling the drain with a mournful glugging sound for years and years and years. And you might also wonder how much longer it can go on like this, before the Final Suck occurs and we're looking at nothing but empty drainpipe.

It'll never happen, you might say. That'd be like saying America's going to shut down its space program, and let other people take over, like the Russians and the Chinese and the Indians and any random jerk-off billionaire looking for an expensive hobby. Oh, wait...yeah. That already happened, didn't it?

Anyway, I have a few ideas about how it all went to hell.

Film As Work

It’s useful to note that American film was initially forged as a working-class entertainment form, generally by workers, for workers, and that this was not, in itself, a bad legacy for our national cinema. In fact, it took shape in an optimal way, making increasingly astute use of the sensational power of moving images cut together. Ours was always recognized in other filmmaking nations as a hot contender for Best Cinema, even before the period of Hollywood’s world-dominance began.

But ironically, in the USA, the world’s most boastful democracy, our basic disdain for the rabble has infected our thinking about American film from the word Go.

Unlike many European national cinemas that from the first displayed their propensity toward cinema-as-art and were embraced as such by their citizenry, early American cinema was regarded as a crude lower-class entertainment form, cranked out for profit, loved by the masses, despised by the elite. Early theaters for projected films were vaudeville houses running movie shorts between live acts catering to the hoi polloi, who liked to see dog acts and plate spinners and dance teams and slapstick comedy skits all mixed up together.

Converted-storefront “nickelodeons” exploded as the most popular entertainment venue because they were the cheapest. Virtually everyone, even the poorest, could afford to pony up a nickel to see amazing ghostlike images of ourselves walk out of a factory door at the end of a workday, deboard a train, eat breakfast, play cards, run, jump, box, kiss, dance the hoochy-koochy, and eventually, act out exciting fictional plots.

The men who got into the early, unregulated movie business on the ground floor were tough working-class guys themselves, often immigrants, looking for any kind of a break. The reason so many major Hollywood studio heads wound up being Jewish is because in the early days of cinema, Jews were kept out of most “respectable” businesses and had to stick to hardscrabble trades in marginalized industries. Famous examples: Louis B. Mayer, head of MGM Studios, born Lazer Meir, Russian immigrant, Jewish, former junk salesman; Samuel Goldwyn, head of the Samuel Goldwyn Studio, born Samuel Goldfish, Polish immigrant, Jewish, former glove salesman; Harry Cohn, head of Columbia Pictures, second-generation immigrant of German-Jewish extraction, former streetcar conductor and sheet music promoter; and the Warner Brothers of Warner Brothers Studio, Jack, Harry, Sam, Albert, born Jacob, Hirsch, Schmuel, and Aaron Wonsal, second-generation immigrants of Polish-Jewish extraction, former shoe repairmen, bicycle shopkeepers, grocers, whatever they could get.

Up through the 1910s, the upper classes and the guardians of culture tended to disparage the movies. Aspiring actors, writers, and directors seeking careers on the “legitimate stage” avoided working in movies unless they needed fast cash, in which case they sometimes worked under pseudonyms, so as not to damage their reputations. Early film critics—usually theater critics forced to cover the movies as well—held their noses while they typed complaints about the execrable mess of the movies, and urged more coherent narratives in the mode of the theatrical “well-made play.” Cultural reformers fretted about the deleterious moral effects of the movies. Not just their content—which always tended toward the violent, rowdy, and sensational—but also their mode of presentation—close-quarters seating, lights turned off, disreputable locales.

The assumption tended to be that, under cover of darkness, every working class girl was liable to get pregnant at the movies, and every immigrant boy was liable to impregnate someone or steal something or knife somebody. In short, unless prompt steps were taken, the popularity of movies would drive the working classes, always so inclined toward degeneracy, straight into the arms of Satan.

According to this thinking, lower-class children, especially, required saving, because they seemed to love movies with an all-consuming love, and also because, with early intervention, they had the capacity to become “civilized” and move up in class someday. As Richard Butsch argues in The Making of American Audiences: From Stage to Television 1750 – 1990:

For those of you who have been following my series on how non-profits are abused to finance right wing agendas, campaigns and elections, this is a good sign. Mother Jones reports that former IRS director Marcus Owens has called for a bright-light focus on them.

"The government's going to have to investigate them and prosecute them," says Marcus Owens, who ran the IRS' tax-exempt division for a decade and is now a lawyer in private practice. "In order to maintain the integrity of the process, they're going to be forced to take action."

In their initial applications seeking tax-exempt status under a particular provision of the tax code, section 501(c)(4), dozens of political non-profits told the IRS their political spending would be limited or, in some cases, non-existent. (Otherwise, they wouldn't qualify for this advantageous tax status, which allows them to take foreign donationsand hide the identities of their funders.) But ProPublicareported that many of those groups have spent big on politics. In 2008, for instance, the Iowa-based American Future Fund assured the IRS on its tax-exempt application that it would spend "no" money to influence elections; the same day the group mailed its application, it released a web adhailing then-Sen. Norm Coleman (R-Minn.) and went on to spend $8 million on politicking in the 2010 elections. Americans for Responsible Leadership, an Arizona-based nonprofit, was more bold: It told the taxman it would engage in zero political work. It then spent $5.2 million backing Mitt Romney.

These organizations do not simply exist to function as conduits for elections. They exist to guide large sums of money into unaccountable silos to fight against candidates and issues on a state by state basis. No issue is too small for billionaires to take up, and the real beneficiaries are the consultants, media buyers and fundraisers who are paid millions to push the message out.

Millions in, garbage out. Yes, investigate and prosecute would seem to be a no-brainer. Ironically, the only 501c4 who has had their status denied is Emerge America, a group that recruits and trains Democratic candidates. Funding for Emerge America is a drop in the bucket compared to the millions that have flowed through these nonprofits on the right-wing side. Ironically, what cost Emerge America their exemption was the truth, which they told on their application for exemption.

Conversely, right wing organizations put a lot of nonsense and lies in their applications, get approval, and the IRS never spends another moment on them. Here's an example of the crap they say:

XYZ Committee, Inc is a social welfare organization dedicated to educating and informing American citizens, in an in-depth manner, about free market principles and policies and about the importance of working together to encourage opinion leaders and public officials to support ideas, programs and policies that promote the concept of a free market.

XYZ Committee, Inc. will work to inform the general public about various public policy issues...and will promote the concept of a free market as the appropriate solution.

[...]

XYZ Committee, Inc does not plan to produce its own publications or advertisements at this time, but XYZ does intend to help other organizations plan for and create campaigns that will best communicate the policies and principles of a free market to the general public.

That particular organization received approval three months after they filed their application.

Tax experts like Owens, Hill, and Tobin aren't the only ones prodding the IRS to take action. Campaign finance watchdogs have hounded the agency for years for not investigating and punishing politically active nonprofits. In a letter dated January 2, lawyers with the Campaign Legal Center and Democracy 21, two groups that favor more regulation of political money, urged the IRS to officially deny tax-exempt status to Rove's Crossroads GPS. (The group's application is technically still pending.)

"Crossroads GPS served as little more than a campaign operation in 2012," the lawyers wrote.

Collegio, the Crossroads spokesman, has dismissed the letter as "the 25th identical letter that the partisans and ideologues at the Campaign Legal Center have sent to the IRS, and it doesn't merit anyone’s attention."

Well, yes. It absolutely merits attention. But it never seems to get any.

I will volunteer my time to the IRS to assist in the audit process of these organizations, if it would help get this done. If they allow these organizations to serve as money laundering operations for campaigns and elections, do you suppose there might be money laundering occurring in other contexts?

Political activism caused his dismissal. University of Ottawa's campus isn't safe. President Allan Rock is a former Canadian politician.

He runs U of O like his private fiefdom. Like a police state. He's unprincipledly hard right. He ignores fundamental Canadian law doing so.

Academic freedom doesn't matter. Or free thought, opinion or expression. U of O is a hotbed of fascist extremism. It's inhospitable to learning.

U of O Law Professor Joanne St. Lewis colluded with Rock. She did so against Rancourt.

She sued him unjustifiably. She wants $1 million. She irresponsibly charged racism.

It related to his legitimate blog site comments. He called St. Lewis a "house negro." He cited Malcolm X. He first used the term.

A 2011 Statement of Claim (SOC) against Rancourt said:

"The Defendant's conduct and actions are reprehensible insulting, high-handed, spiteful, and outrageous."

"Such conduct warrants condemnation by this Court by means of an award of punitive damages."

It spuriously claimed "(t)he Defendant defamed Professor St. Lewis in furtherance of his personal animosity towards President Allan Rock and the University of Ottawa which terminated him as a Professor."

U of O pays all St. Lewis legal fees. Doing so smacks of collusion. It violates Rancourt's Canadian Charter of Rights and Freedoms.

For over three years, he's battled for justice so far denied. One-on-one against St. Lewis is one thing.

Rancourt is his own legal defense. He taught himself law to do so. During his opening jury statement, Charbonneau silenced him.

He did so reprehensibly. He acted extrajudicially. He took the law into his own hands. He twisted it irresponsibly.

He prohibited Rancourt's fundamental right to speak. He violated Section 2(b) of the Canadian Charter of Rights and Freedoms. It's a constitutional bill of rights. It states:

"Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association."

Article 7 assures "Everyone has the right to life, liberty and security of person and the right not to be deprived thereof in accordance with the principles of fundamental justice."

Academic and speech freedoms are inviolable. So is the right to a fair and just legal defense. America denies them. So does Canada.

Doing so reflects police state injustice. Charbonneau is more hanging than real judge. He shames the office he holds.

He has no legitimacy whatever. Rancourt walked out of court in disgust. He explained why, saying:

"On May 16, 2014, at 10:00 AM, in courtroom #36 of the Ottawa Courthouse of the Ontario Superior Court of Justice, I walked out from the trial in which I am being sued, and in which I was representing myself without a lawyer."

"The trial is continuing in my absence, before a Jury of my peers." He continued, adding:

"Your Honour, the law foresees that I must be free to advance the very serious charge of “reasonable apprehension of bias."

"It is very difficult for me to make this intervention. Give me five minutes because I must present the new evidence."

"During my motion of May 7, 2014, asking that Your Honour recuse himself, Your Honour's decision was silent on the central point that I had made that Your Honour's decisions in this action could affect the reputation of the University of Ottawa and affect the monetary value of its scholarships, to which Your Honour donates money regularly and annually."

"Then, on the first day of trial, Monday May 12 of this week, we did a motion in the afternoon, a so-called 'Voir Dire,' with detailed facta."

"Mr. Dearden (plaintiff's lawyer) brought the motion with a factum of 32 pages served on May 9 and accompanied by a book of authorities of 347 pages."

"His motion was to eliminate my defence called 'Litigation by proxy contrary to the Charter.' "

"I answered with a factum of May 9 containing 14 pages and accompanied by a book of authorities of 342 pages."

"I argued in detail that, in fact, my defense was a defence of abuse of process having three branches, with one branch being the 'Jameel' defence based on a 2005 decision of the England and Wales Court of Appeal: Dow Jones Inc. v. Jameel, and I pointed to paragraphs 68 to 71 of my 'Statement of Defence' as pleading this Jameel defence."

"The decision of this Court (of Your Honour) was pronounced on May 14 regarding the said motion or Voir Dire: The paragraphs 61 to 67 of the Statement of Defence were struck."

"Paragraphs 68 to 71 remained intact, as did my Jameel defence."

"Then, on May 15, yesterday, during my Opening Statement, the Court allowed Mr. Dearden to interrupt me when I was explaining my Jameel defence to the Jury."

"And Your Honour, off the cuff, struck and forbade my Jameel defence despite my protest, and despite the fact of not having done so when Your Honour should have done so if you had had that intension."

"It has been more than three years that I have been fighting for procedural justice in this action - and my 'Statement of Claim' is struck, cut into pieces, before my eyes during my Opening Statement, in contradiction with the considered decision of May 14 of Your Honour."

"This would give nightmares to Kafka himself."

"To my eyes, we are no longer in Canada - and we can no longer claim to have a system of justice in this action before you Your Honour."

"I am outraged by this gag order imposed in a manner that is apparently arbitrary, which does not allow me to be heard and to 'have my day in court.' "

"I have pleaded 'abuse of process' at every step and now, at trial itself, I don't even have the right to say that the University of Ottawa is entirely financing the plaintiff or the right to use the Jameel defense that applies to situations where the defendant advances a lack of actual damage to reputation, that’s 'actual' damage, and to 'reputation,' not some other kind of damage."

"I was very disturbed by these incomprehensible events, and I have been deeply perturbed all day yesterday; confused also, as a self-represented litigant."

"This morning I inform the Court that I can no longer participate in such a process."

"Therefore, I'm leaving this unjust process. You will take the decisions in my absence. It's over for me: I’m leaving."

How can there be with wars raging out-of control! Who's celebrating while mass slaughter and destruction persist?

No Christmas cheer this year for billions. No Feliz Navidad. No happy holiday. No Wise Men spreading good will.

No silent, holy night. No decking the halls. No herald angels singing. None heard on high.

No coming all ye faithful. No telling it on the mountain. No merry gentlemen resting. No peace on earth coming upon a midnight clear.

No most wonderful time of the year. No having yourself a merry little Christmas. No holly jolly one. No wishing you one in times of war, injustice and human suffering. Imagine them on an unprecedented scale.

No frosty the snowman fun. No winter wonderland. No jingle bells joy. No auld lang syne.

No Christmas 2014 to remember. No Santa on his sleigh. None coming to town. No gifts for billions.

No peace with war winds raging. None with growing global human misery. America is Scrooge writ large. It's the Grinch that stole Christmas.

Scoundrel media editors claim otherwise. They support the worst of all possible worlds. They pretend aggressive wars are liberating ones.

They claim nations are destroyed to free them. They call imperial dominance democracy.

They glorify wars in the name of peace. Humanitarian intervention and responsibility to protect (R2P) mask ravaging one country after another. Mass slaughter and destruction reflect it.

They call plunder economic development. They pretend Christmas 2014 reflects peace and good on earth.

A decades earlier radio program was called "The Greatest Story Ever Told." It related biblical narratives. It was popular at the time. It inspired a Hollywood film by the same name.

One Bible story remained popular, said WaPo editors. It's "a tale of universal appeal." It's "a story of love and triumph over adversity and also of humility, of the good to be found in the most modest of circumstances."

It reflects the spirit of Francis of Assisi, they said. He preached "reverence for all living things." He created the first manger creche.

His "living Christmas story was taken up in many towns and villages." They created their own manger scenes. They reflect the seasonal spirit.

Chicago Tribune editors headlined "As Christmas dawns." They published the same Christmas day editorial since 1988.

Perhaps they have no original thoughts. Maybe they don't care about what's most important. They asked:

"What is this day, this Christmas, that dawns with a chorus of joy? What river of love and magic speeds the message from that moment of wonder in Bethlehem across the cold darkness of centuries long forgotten?"

"How does it warm us this morning as we awaken in a world the Wise Men could scarcely imagine to a radiance that once each year makes it all just a little bit better?"

For whom, Tribune editors didn't say. For America's 1%, it never was better. For most others, it's lump of coal harshness.

Joy didn't arrive Christmas morning. It won't appear later in the day. Or the next one. Or throughout the holiday season.

It's absent throughout the year. So is the "Prince of Peace." No "(s)ing(ing) out the praises of Christmas... (No) sing(ing) them in shouts and whispers."

Tribune editors support the worst of imperial harshness. They deplore peace and good will. They claim otherwise.

They hypocritically said "remember…the pain of others...the Christmas joy of sharing out humanity."

"We are our brothers' and our sisters' keepers...Rejoice in the accumulated sights and sounds of the season that fill us this Christmas Day."

..."(W)e praise this day, this Christmas, that dawns with a chorus of joy."

Tell it to Chicago's homeless. Imagine sleeping outside in sub-freezing temperatures. Imagine having to beg for nickels, dimes and quarters. Imagine needing them to buy bare bones food.

Imagine having nowhere to go when sick. Imagine no one able to change things caring. Imagine suffering out of sight and mind.

In July 2013, the Chicago Coalition for the Homeless estimated around 116,000 affected Chicagoans.

It's 10% higher than year ago numbers. It includes nearly 19,000 students. Around 98% are children of color. An estimated 20% have disabilities and development delays.

On December 13, the US Conference of Mayors Hunger 2013 Homelessness Survey said Chicago homelessness increased 11.4% year-over-year.

Christians annually commemorate Christ's birth. LA Times editors call it "one of the central miracles of the New Testament."

No peace and good will miracles arrived Christmas morning 2013. Expect none throughout the holiday season for billions worldwide.

None appeared throughout 2013. Expect none next year. LA Times editors turned a blind eye to what's most important. They ignored Obama's war on humanity. They said nothing about global human suffering.

He headlined "In Hoc Anno Domini (in this year of our lord)." He discussed ancient Rome. "There was oppression," he said.

He highlighted Rome's "tax gatherer." It took "grain from the fields and the flax from the spindle to feed the legions or to fill the hungry treasury from which divine Caesar gave largess to the people."

There was "persecution" and "enslavement...Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar's and unto God the things that are God's."

"…Paul of Tarsus...spoke to his brethren." His words would be remembered. "Stand fast therefore in the liberty wherewith Christ has made us free and be not entangled again with the yoke of bondage."

Royster won two Pulitzer Prizes. His editorials and other writing reflected lump of coal harshness. He deplored social justice.

Dow Jones & Company began publishing the WSJ in July 1889. In August 2007, Rupert Murdoch bought it.

Throughout its history, hard right opinion shut out progressive fairness. Under Murdoch, it does so more than ever.

Royster championed free markets over fair ones. So do current Journal editors. They believe whatever government does, business does better so let it.

They want every one left on their own sink or swim. They believe whatever is good for business is good for America.

They support corporate and super-rich privilege over social justice. Power and profits matter most of all.

What would Jesus say today? What would he think about today's America? What would he do?

How would he address ideological extremism? What would he say about neoliberal harshness? How would he contest destructive dark forces?

He preached nonviolent resistance. He lived it. He taught it. He deplored injustice. He urged "go(ing) the second mile." He said "love your enemies. (D)o good to those who persecute you."

In what is a staggering example of not only state meddling in the affairs of the "free press", but worse, sheer state idiocy, yesterday the WSJ posted an article on its website revealing that as many as 24 co-conspirators would be exposed shortly in the ongoing Libor manipulation scandal and divulging the names of various individuals on this list. What promptly followed was truly bizarre. As the WSJ reports shortly after posting the article, "a British judge ordered the Journal and David Enrich, the newspaper's European banking editor, to comply with a request by the U.K.'s Serious Fraud Office prohibiting the newspaper from publishing names of individuals not yet made public in the government's ongoing investigation into alleged manipulation of the London interbank offered rate, or Libor." This happened at 7:18 pm London time, after the original WSJ article had already hit the Internet.

The WSJ added that "The order, which applies to publication in England and Wales, also demanded that the Journal remove "any existing Internet publication" divulging the details. It threatened Mr. Enrich and "any third party" with penalties including a fine, imprisonment and asset seizure."

As a result, the media organization decided to comply with this gross example state censorship, and now in the place of the article, one could find the following note:

The article said the government was preparing to name roughly two dozen traders and brokers, adding that prosecutors were still finalizing their plans and that the list could change, citing people familiar with the process. Inclusion on the list doesn't represent a formal accusation of wrongdoing and doesn't mean the individuals will be charged with crimes.

"This injunction is a serious affront to press freedom," said Dow Jones & Co., publisher of the Journal. "We have been left with no choice but to remove the previously published story from WSJ.com and to withhold publication from the print edition of The Wall Street Journal Europe. However, we will continue to vigorously fight the injunction in the coming days."

Yet it is not the censorship that is most shocking here, but the way the UK's SFO went about scrubbing the trail. Because while the European version of the newspaper may have retracted the article from today's print edition, the piece was still in the US version. Furthermore, since the original WSJ article hit the net before it was pulled, it was promptly picked up and reforwarded by either robotic or manned resyndicators of the WSJ. One such example was ValueWalk which took down the salient details that the SFO is so concerned about:

Among those who could be name are several of Hayes’ former coworkers at both Citigroup Inc and UBS AG. Michael Pieri, who was Hayes’ boss while he worked at UBS, was fired by the bank and moved to Australia. Hayes’ former assistant at UBS, Mirhat Alykulov, could also be on the list. Sources said he has been cooperating with investigators from the U.S.

Another name which could be on the SFO’s list is Christopher Cecere, who was Hayes’ boss while he worked in Citigroup’s Tokyo operations. Cecere resigned from his position at Citigroup around the same time Hayes was fired. Other people who could be on the list are ex HSBC Holdings plc trader Luke Madden, former JPMorgan Chase & Co. employee Paul Glands, and former Rabobank employee Paul Robson.

And, of course, the full list is in today's US print edition of the WSJ. Which begs the question: aside from matter of state censorship and free press intervention, what exactly did the UK hope to achieve here? After all, a cursory one minute search would reveal all the names hidden, but now the extra buzz generated by UK's attempt to quash the story, merely made it that much more interesting to all, and whereas some may have skipped it - after all who really cares about Libor manipulation anymore considering the entire market is openly manipulated by the Fed now - now everyone will focus on the names that were purposefully withheld.

In today's On the News segment: After yesterday's landmark challenge to the federal Defense of Marriage Act, the pro-equality crowd is hopeful; corporations rake in record profits and pay half as much in taxes as they did just a few decades ago; the Senate will begin voting on gun-control legislation next month; at least 6.2 million children have at least one unemployed parent; and more.

Thom Hartmann here – on the news…

You need to know this. After yesterday's landmark challenge to the federal Defense of Marriage Act, the pro-equality crowd is hopeful that the Supreme Court will strike down the discriminatory law. During the oral arguments, the majority of the Justices seemed ready to strike down DOMAs key provision, which denies same-sex couples the right to all the federal benefits of marriage. The liberal justices expressed obvious concerns over DOMA's impact on same-sex couples, and the usual swing vote, Justice Anthony Kennedy, seemed to conclude that the law infringed on state's rights to define gay marriage. The Court's most conservative justice, Antonin Scalia, expressed frustration at the President and the Attorney General for refusing to defend the law. The most notable moment of yesterday's arguments came from Chief Justice John Roberts, when he attempted to make the case that the “gay lobby” was too politically powerful to warrant constitutional protection. Roberts suggested that lawmakers are “falling all over themselves” to legalize gay marriage, as if to imply the LGBT community doesn't meet the “heightened scrutiny” requirement to be considered a protected class. But the fact is, more than 30 states in our nation have laws on the books barring same-sex marriage. LGBT families still have a long fight ahead to achieve full equality. The Supreme Court is expected to issue their ruling on DOMA, and Tuesday's Prop 8 case, later this year. Let's hope they strike down both discriminatory laws, and pave the way for same-sex couples to marry in every state in our nation.

In screwed news... As corporations rake in record profits, they're paying half as much in corporate taxes as they did just a few decades ago. A recent analysis by the Washington Post found that in the 1960's and 1970's, federal taxes of major U.S. corporations represented 25 to 50 percent of worldwide profits. However, today 22 of the 30 companies in Dow Jones Industrial Average are benefiting from effective tax rates that are 10 points lower. Despite the Republican talking point that the United States has the highest corporate tax rate in the world, most of these major corporations utilize off-shore tax havens to stash away huge profits. These corporations use our roads, waterways, electric girds, and environmental resources to generate their historic profits, yet we're letting them get away with paying virtually nothing for that privilege. It's time to end the tax breaks for companies that ship jobs – and profits – overseas.

In the best of the rest of the news...

Next month, the Senate will begin voting on gun-control legislation, and advocates of stricter gun laws are out reminding legislators that it's time for real reform. Today, gun-control groups are staging a “National Day to Demand Action,” which will include more than 140 public events in 29 different states throughout our country. Mayors Against Illegal Guns will also be running a $12 million television ad campaign this week, to target senators in 13 states who have yet to voice their support for new gun control regulations. The Washington Post reports that today, President Obama held a press conference with mothers who support gun restrictions, and yesterday, Vice President Biden took part in a conference call with gun-control activists. On that call, the Vice President said “I think we're on the verge of getting a serious, thorough, universal background check system in place, and it will save lives.” It appears the gun-lobby may finally be losing it's grip on Congress, and we may finally see some real gun-control reform. It's about time.

Even before Republican austerity measures took effect, one out six children in our nation were already impacted by unemployment. According to a new study from First Focus and the Urban Institute, at least 6.2 million children have at least one unemployed parent, and a staggering 12.1 million kids live in homes with a parent who is underemployed. In 2012, the average weekly unemployment benefit was only $299, and the sequester cuts that amount by almost 10%. So, families struggling to survive now find life even more difficult to afford. As The Think Progress Blog points out, the effect of an unemployed parent can have long-term consequences for children. These kids will likely have lower math scores and poor attendance records, and they will be more likely to fall into poverty later in life. Children our are future – and that's more than a cliché. It's the truth. They are the people who will be running our country someday. There are many reasons we need to put a stop to the Republican austerity, and the devastating effect it has on our children should be reason number one.

And finally… Video game lovers have a new reason to attend minor-league baseball games in Pennsylvania. That's because the men's urinals at the Lehigh Valley IronPigs' Coca-Cola Park will soon feature the world's only, truly hands-free video game. Video screens mounted above the urinals in the park bathrooms challenge players to “steer” along a snowmobile course, and try to hit cartoon penguins along the way. The game is aimed at increasing men's awareness of prostate health, and features messages throughout the game reminding men to get a prostate exam. The new games will be available for use when the IronPigs' season starts next week. The team spokesman, Jon Schaffer, said they bought the restroom entertainment from a UK company, called Captive Media. He said, “They told us with certainty that it's not in any other sports venue in the world.” The games are already in use in bars in the United Kingdom, but the IronPigs will be the first to offer “p-controlled” video games in the U.S. The games will likely be a hit with men in the ball park, and it wouldn't be surprising to see them in more venues before long. Soon, men everywhere will have a new excuse for why they spend extra time in the bathroom.

And that’s the way it is today – Thursday, March 28, 2013. I’m Thom Hartmann – on the news.

The Peruvian government has declared an environmental state of emergency after finding elevated levels of lead, barium, and chromium in the Pastaza River in the Amazon jungle, reports the Associated Press. Indigenous peoples in the area have been complaining for decades of widespread contamination from oil drilling, but this is the first time the Peruvian government has acknowledged their concerns. Currently 84 percent of the Peruvian Amazon is covered by potential oil blocs, leading to conflict with indigenous people and environmental degradation.

The Peruvian Environment Minister, Manuel Pulgar-Vidal, said that Pluspetrol, which has operated the oil bloc in question—1 AB—since 2001, would be liable for cleaning up the pollution. But the minister also noted that Occidental Petroleum, which operated the bloc from 1971-2001, had not been environmentally responsible in its operations either.

River in the Peruvian Amazon. Photo by: Rhett A. Butler.The news comes shortly after Peru set forth its first environmental standards for soil pollution, which the government claims is what led to the announcement of the state of emergency. For the first time Peruvian experts had standards by which to measure contamination in the Pastaza River bed.

Pluspetrol now has 90 days to clean up the Pastaza River and mitigate risk to the local Quichua and Ashuar peoples.

Peru has 659,937 square kilometers of its Amazon rainforest (84 percent) under actual and potential oil and gas development, an area larger than Afghanistan. Not surprisingly—given the scale—many of the oil blocs cover indigenous lands and protected areas. Such concessions not only imperil indigenous groups and the forest itself, but also many tribes that live in voluntary isolation who are especially susceptible to disease.

Meanwhile oil companies are complaining that Peru’s regulatory process is stifling the development of the country’s oil fields. Dow Jones Newswires reports that 16 oil companies have come together to lobby the Peruvian government on increasing oil production.

In 2009 conflict between oil development and indigenous rights erupted in violence. A clash between protestors and government police lead to the deaths of 23 police officers and at 10 indigenous protestors. Indigenous groups have since accused the government police of hiding protesters bodies in order to hide the scale of the violence.

How we answer it determines whether we will be able to sustain civilization as we know it beyond the mid-century.

Yet most of economics concerns itself with what an economy does, not what its goal is or ought to be. For example, much of economic policy can be summed up in the words of Harvard economist, Dani Rodrick, who distilled economic development down to the a three word mantra, "stabilize, privatize and liberalize."

To what end? That question isn’t even considered. The implicit assumptions, of course, are maximizing economic growth and creating more wealth.

These two unexamined assumptions are the twin horsemen of the new apocalypse.

Whether that growth is distributed fairly and whether it exceeds the capacity of the environment to sustain, is either assumed away by the Invisible Hand, or dismissed disdainfully by economists as the province of philosophers and other soft academics in squishy social disciplines.

In fact, many economists—schooled by the most popular text in the discipline, Paul Samuelson’s Economics, or one of its many newer incarnations—take pride in saying that their discipline is non-normative—that is, amoral. Not immoral, but operating outside the context of values, ethics and morality.

Moreover, because the discipline is intent on being a quantitative science, economics as a field discarded the essence of what an economy should be about in exchange for the ability to “hide in thickets of algebra” as Joan Robinson put it. A classic example of Whitehead’s Fallacy of Misplaced Concreteness, in which the abstract ideal is treated as the tangible reality.

For the last 50 years we’ve been steering our national economy, as well as international economic policy, by this amoral, future blind, compass. No other discipline dominates political theory and practice as much as economics.

Which goes a long way toward explaining exactly why our economy is so unjust and our ecosystem is in imminent danger of collapsing.

We always want to keep in mind what the function, the purpose, of the economy is. […] the purpose of an economy is not producing GDP. It is increasing the welfare of citizens, and it is increasing the welfare of most citizens. And the American economic system has failed, and failed very badly.

Let’s examine the two assumptions: 1) the purpose of an economy is to create more wealth and 2) wealth is measured by currency.

As Robert Costanza pointed out, the annual value of just 17 ecosystem services (PDF) exceeds the value of the entire human economy, yet that value is treated as an externality – that is, these services are not even priced in the market. So our definition of “wealth” leaves out debts that exceed the entire income stream from the human economy.

And Costanza’s work was done before we had a good understanding the extent of climate change and the enormous costs it imposes upon us.

So in essence, we are liquidating the real basis of wealth, natural capital, and counting it as wealth creation. So much for wealth.

Now, let’s look at currency. As Chris Martenson puts it, money is not wealth, it is merely a claim on wealth. But it can grow indefinitely while the world is finite. So we end up with a claim on wealth that far exceeds any available wealth. Which is debt.

If the function of an economy is merely wealth creation, then we need to redefine wealth, or it is self-terminating. Oh, and it will take us along for the ride.

We can see the bow wave of this destruction with climate change, ocean acidity, accumulated toxins, depleted resources.

The real purpose of an economy has to be something much different that what we use to formulate policy. Joseph Stiglitz’ purpose—increasing the welfare of most citizens—had it half right. A billboard spotted in Johannesburg, South Africa during the World Summit on Sustainable Development probably made as good a statement on the appropriate goal of the economy as any: “Enough for everyone, forever.”

An economy designed around this goal would look completely different than today’s “Everything for a few, right now,” economy does.

It would steward ecosystem services and resources using taxes, subsidies, tariffs, and property rights. The idea of distributional equity would not be a blasphemy, but a pragmatic response to the natural tendency of capital to get concentrated in the hands of the few, and a recognition that a market economy can’t function without generalized prosperity.

Co-ops and employee-owned companies would be the most common ownership model; CEOs wouldn’t get 800 times the minimum wage. There’d be no Bill Gates making some $218,000 and hour. Fossil fuels would be heavily taxed, and the revenue they generated would help fund a low cost transition to a carbon-free economy.

The daily business report would feature an index based on environmental health and resource stocks, not the Dow Jones Index of paper stocks.

But we’re not likely to see such an economy. Both major parties are busy trying to maximize paper currency at the expense of natural capital—the source of real wealth.

John Atcheson is author of the novel, A Being Darkly Wise, an eco-thriller and Book One of a Trilogy centered on global warming. His writing has appeared in The New York Times, the Washington Post, the Baltimore Sun, the San Jose Mercury News and other major newspapers. Atcheson’s book reviews are featured on Climateprogess.org.

I spent a couple of nights last week on the lookout for a cloud of rising smoke. From the chimney at the Vatican? No, thank you -- there were already thousands of journalists around the globe fixated on the ancient mystical wizardry in St. Peter's Square. I was a lot more concerned that black smoke was going to rise from the damp, raw streets of East Flatbush, in a corner of Brooklyn many blocks removed from the high-tech glitz of that borough's new Barclays Center. Night after night, hundreds of young people -- most from the neighborhood -- marched on their local police station house because they wanted answers to a simple question.

Of course, I had to follow the waves of Brooklyn protest -- which teetered for a time on the brink of a riot -- by way of Twitter, since the mainstream media gave very slight, and usually belated, coverage to the doings in East Flatbush. I guess issues of law and order, civil rights and civil unrest, and the right to assemble on a major street right here in the United States can't really compete with the nearly 2000-year-old rituals of wrinkled men with their bright robes and their white smoke.

Still, I couldn't help but think that -- stop me if you've heard this one before -- there's something happening here. Maybe it was because East Flatbush wasn't the only place in America where unusual things were taking place -- the scattered shrieks of regular people who've been pushed to the edge. As the protests in Brooklyn dragged on, I heard the annual budget speech from the mayor of Philadelphia drowned out and finally shut down by the voice of angry blue-collar municipal workers, frustrated that City Hall will no longer listen to them. Just a couple of weeks ago and about 10 blocks away, so many Philly teens, parents and teachers were so upset at the knee-jerk closing of 23 neighborhood public schools that they filled the expanse of Broad Street as they tried to flood the room where the vote was taking place.

There were 19 people arrested at the Philly school shutdown; about 45 arrested in various encounters and scuffles with the NYPD in Brooklyn. All of these events were treated by the media as a total out-of-left-field shock -- as if a spaceship had landed from Mars and deposited these mad-as-hell aliens on the hardscrabble streets of the inner city. And if you haven't been paying attention, you'd indeed think these scattered events had nothing to do with each other. But to the contrary, the same river of bruised blood runs through all of them -- people who are at long last tired of the drumbeat of disrespect.

It keeps coming back to a famous quote that I saw pinging around the Internet a lot last week after it was repeated by the city councilman for East Flatbush, Jumanne Williams, at a hearing. It was uttered by Dr. Martin Luther King in a famous address known as "The Other America" speech. He delivered it a couple of times, including outside of Detroit just months after that city had erupted in flames. The civil rights leader re-affirmed his lifelong commitment to non-violent solutions, but he added this:

I think America must see that riots do not develop out of thin air. Certain conditions continue to exist in our society which must be condemned as vigorously as we condemn riots. But in the final analysis, a riot is the language of the unheard.

It's reached the point where people are straining to be heard over the drone of our all-encompassingkleptocracy. It almost broke loose once, in 2011, with the realization that both political parties were selling out the middle-class in a phony debt crisis, and then the world was stunned by the out-of-nowhere Occupy movement -- thousands of unheard struggling to find their own language. That movement faltered for a variety of reasons, including the risen-again hope that democracy in 2012 could redress the people's grievances.

Into this tinderbox walked the 16-year-old Brooklyn kid named Kimani Gray. Those seven police gunshots later, his short life was over. The naysayers were quick to point to Kimani's flirtation with the gangs of East Flatbush and several arrests, and the allegation by police -- fiercely disputed by eyewitnesses -- that he had a gun and pointed it at the plainclothes officers, to dismiss both the value of his life and the cries of the protesters. But the community deserves answers that it's not getting about what really happened 10 nights ago, as well as the dubious track record of the officers involved.

And New York City officials are doing everyone a huge disservice when they pretend that this is about one kid, and not the daily beatdown of disrespect from programs like stop-and-frisk, which has made it difficult for thousands of young, law-abiding blacks and Latinos to walk down a sidewalk without having to justify their very existence. Today, the courts in the nation's largest city are dealing with a massive class-action lawsuitover the alleged abuses of this policy.

The bottom line is, if it wasn't Kimani Gray, it would have been somebody else.

But Broad's minions must act quickly and smartly...before the voices of the unheard become too loud.

But here's the thing: Unheard voices are like water -- they are going to find the path of least resistance. Unless our leaders finally start listening, a trickle in Brooklyn, a leak in Philly, and suddenly there's a full-blown flood. (If you don't understand the oceanography, ask the folks down in New Orleans, another battered American community.)

When we look back on the long hot summer of 2013, and we will, I pray that we'll think of it as a few balmy days on a beach or in the mountains with family and friends after a season of coming together, of finally tackling our root problems from rising inequality to falling civil liberties.

The Bureau of Labor Statistics last week reported on the numbers of workers in unions. Let's just back up a step first. In 1955, 35 percent of workers were in unions. Most of those were private-sector workers. Well, last week's report says that private-sector workers were down as low as 6.6 percent. Thirty-five percent of public-sector workers are unionized, for an overall rate of 11.3. One more time: 1955, overall rate of unionization 35 percent; last week, 11.3 percent.Now, in that same week, the Dow Jones Industrial Average on the stock market broke 14,000 for the first time in five years—the market's at a historic high.Now joining us to talk about all of this is Stephanie Luce. She's an associate professor of labor studies at the Murphy Institute School for Professional Studies at the City University of New York. She's the author of Fighting for a Living Wage and coauthor, The Living Wage: Building a Fair Economy and The Measure of Fairness. She joins us from New York. In fact, she's in Brooklyn. Thanks for joining us, Stephanie.PROF. STEPHANIE LUCE, LABOR STUDIES, THE MURPHY INSTITUTE, CUNY: Thanks for having me.JAY: So let's focus on the main number here, which is from 35 percent in '55 down to 11 and change now. That's a rather drastic decrease. Why do you think this is happening?LUCE: Well, I think, you know, this steady decrease has been going on for several decades. And for a while, the number of workers in unions was going up as an absolute number, but the density was falling. And now density is falling as well. And I think really you can kind of divide this into different categories of explanations. One of the explanations is that unions themselves are to blame. They were slow to recognize a changing global economy. They were resistant to immigrant workers belonging to unions. They were not innovative in their organizing strategies and not aggressive about corporate globalization. But on the other hand, there's a lot of external forces, too, which is that employers have really been on the offensive against unions in the last 30 years and have in fact changed laws, changed regulations, and even broke—you know, they've—breaking laws as a way to fight unions and keep unions out of the workplace. So we see weak labor law, weakly enforced labor law, but also changing global rules and regulations around workers' rights.JAY: Well, let's start with some of the internal factors first, and then we'll go to external. I mean, it seems to me one of the internal factors is that the leaders of many of the major unions get paid very, very well. I mean, some of them are in the $200,000, $300,000 mark, plus they get all this expense accounts. You can often run into, you know, leaders of major unions eating steaks, you know, $40, $50 steaks and such for lunch. And I've seen it. This isn't just some stereotype. And, frankly, it's, you know, their argument as well: people that run businesses, you know, live this way; why shouldn't the leaders of workers live like this? But that's exactly the point is they started living and thinking like people that run businesses.LUCE: Right. Yeah. There's no doubt that we've had bureaucratization and some corruption and a greater hierarchy within the labor movement. That certainly is a problem. There are a lot of unions that are not really democratically run. They don't really involve their members. You know. And I think that for some people to say, well, that should suggest that we don't need unions or unions are outdated, I often say, well, that's also true in Congress. We see a lot of members of Congress, you know, engaging in corruption and not so democratic. But we're not necessarily calling to abolish Congress, right? We're calling for reform and revitalizing to make it more democratic and more engaging. And I think the same is true of unions, which is that, you know, unions' leaders have had faults, but I'm not ready to give up on them as institutions. I think they still represent one of the only chances that workers have for a democratic voice in the workplace.JAY: Well, one of the numbers in a recent blog you wrote I think is important, which is, the average union member earns 27 percent more than the average nonunion member. So, I mean, I think that shows that, you know, whatever the weaknesses of our unions are, they're still rather—it's a hell of a lot better being in one than not being in one. But in some ways has that not also been part of the problem, which is, for, you know, post World War II there was a kind of a gravy train, especially for the upper tier of workers, like autoworkers and workers in transportation and critical sectors of the economy, where they got very significant wage gains—it wasn't just the union leaders; many of the workers were doing very well. It wasn't unusual to, you know, have a couple of cars and know you could afford university and all the rest. But they didn't give a damn about all the unorganized workers and some of the other sectors of the economy. They kind of were just looking after their own people. And then one day they look around and they find out, oh-oh, we're next.LUCE: Yeah. Well, I mean, I think on the first part is that, yes, unions led to, you know, workers getting a decent income and having some stability, maybe buy a home and send their kids to college. I don't know that we want to—I don't know that I would critique that as too high, because I think workers were getting a share of what they were producing.But on the second point, you're right: they should have been aggressively trying to organize more workers, getting nonunion workers into unions, keeping ahead of what's going on in the economy in terms of changing industries and sectors. And I think not enough of them did that. I wouldn't say no one was doing that, but certainly not enough. And they for the most part, you know, got lazy and behind the trend and didn't keep up with where the economy was going.JAY: Yeah. I mean, I think it's important. There are some unions that are actively organizing and a few unions that are quite militant about their own members and reaching out to others. But I would say the majority have not been—although now that they're being targeted, I mean, maybe you could see a kind of turning point with Reagan and the air traffic controllers. Since that point, sort of the guns have been pointed at some of these stronger American unions. Again, before we get to external factors, let's talk a little bit about the politics of this. I mean, part of the issue is, when there's been Democratic Party governments, either at state levels and nationally, the unions don't seem to have used the clout they used to have to get legislation that might have made it easier to organize unions. And now that they're so weak, they don't have much clout.LUCE: Yeah. And, in fact, even going back to when they were stronger, in the 1970s, we had, you know, Jimmy Carter in office, and we—the Democrats controlled everything, and yet unions were not able to win major labor law reform. So I think that the Democrats have really not been the friend of labor that unions might think that they are. It's not that union leaders are all stupid, but they also realize that they don't have a real exit strategy in this political system, so they've aligned themselves with the Democrats, and for the most part that's been a losing strategy.I think that it didn't work so well even in the '70s when they were strong, and today, as you just said, it certainly is not a way to win any major reform. I think that unions have to seriously rethink their allegiance to the Democratic Party. If it's not realistic to start their own party, they could at least think about withholding their contributions in terms of money and time that they give to electing Democrats over and over again who turn around and sometimes stab them in the back.JAY: This number stands out for me, that unionized workers make 27 percent more than nonunionized workers. Why isn't that fact better known? Like, instead of spending all these millions of dollars of union money promoting the Democratic Party, why don't they spend millions of dollars promoting the fact that unionized workers make more than nonunionized workers? 'Cause I don't think most nonunionized workers know that.LUCE: Well, I think, you know, it's not just wages. They're actually much more likely than nonunion workers to receive health insurance, pension, paid days off, and job security. And a union contract is one of the only ways that workers have to gain any kind of job security in our employment-at-will system. I think there's a little bit of a double-edged sword there, which is, sometimes by promoting that union workers do better, they're afraid that they make themselves more of a target from employers. Like, if they highlight how much, you know, they provide to workers, then does that in fact make unions a greater target? I think that's a mistake, because they already are a target. Employers certainly know this themselves. You know. And another interesting point, though, that I want to highlight is it's not just that—union members make more money than nonunion members, but a lot of research suggests that by having greater union density actually brings up the economy as a whole. So it's good for even nonunion workers when there's greater union density. Some research by Bruce Western at Princeton, he estimates that about 20 to 33 percent of the growth in inequality in this country is because of the falling union density, and he says that what unions did is create a general sense, a norm of equity, a general sense of wage fairness. And what unions do is also reduced inequality between workers. They actually reduced discrimination, for example, between male and female workers or between white and black workers. So there are lots of positive benefits of unions that help not just workers but the economy as a whole.JAY: There's quite a deep-seated feeling, though, amongst unorganized workers that organized, unionized workers, higher-paid unionized workers, is pushing work outside the country, and they blame the unionized workers.It's interesting. We covered a strike in Sudbury, Canada, which—the dynamic here is similar, although unionization rates in Canada are still somewhat higher than in the United States. But this is essentially a one-industry town, a nickel mining town. The nickel miners spend all their money in the town. It's because they've been highly paid that the town does relatively well. They go on strike. And I think—you know, I can't give a scientific take on this, but a majority of ordinary people in the town we talked to were actually blaming the workers for wanting to be highly paid even though they're the spending money in the town, because the company's threatening to go get the nickel somewhere else in the world—which is kind of funny, 'cause obviously, you know, they wanted that nickel. But this division between organized and unorganized workers, I don't see the unions actively fighting it, 'cause even in Sudbury the union wasn't doing that much public relations work to make people understand why that's good for the town.LUCE: Well, I do think some unions are trying. Some unions are active in things like living-wage campaigns and labor-community coalitions to help, you know, low-end workers. But I think, you know, you're right that they need to do a better job of explaining what's going on. I mean, what's interesting is a lot of the drop in unionization in the last year was not because—you know, some of it's jobs moving overseas, but a lot of it is in the public sector. These are not jobs that are moving overseas. This is just, you know, governors attacking workers' rights to form unions. Another huge drop in unionization over the last several decades was in construction. Again, these are not because the employer's moving those jobs to China. These are the same jobs, they're staying here in the United States, but they're being converted to nonunion jobs. So I think you're right. We need a better story and understanding of what's going on in the economy, and that it's not just an inevitable result of globalization that, you know, unions are going to die off.JAY: Yeah. The one words or letters that we have not heard from President Obama during the last presidential election—we haven't heard anything now that he's been inaugurated—was EFCA, the Employee Free Choice Act. This was supposed to be the grand bargain, if you want, with the unions, that President Obama's going to reform labor legislation. And not a whisper of it now.LUCE: Right. Right. And I'm not surprised, because I didn't ever believe that Obama was just going to come in and sign this sweeping labor law reform that, as I said, Jimmy Carter and the Democrats didn't do in the 1970s. I don't think we're going to see any kind of widescale reform like that without massive social protest. I think the unions were grossly mistaken to think they were going to get something in through backdoor channeling, lobbying, or whatever it might be instead of having, you know, massive sit-downs or, you know, people marching in the streets or other forms of social protest. And I feel Obama himself even kind of made that comment when he was first elected. But the unions really didn't pursue that avenue.JAY: Right. Well, thanks for joining us, Stephanie.LUCE: Thank you so much.JAY: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

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Thursday trading is expected to be intense: Russian stocks likely to grow amid positive signs from Asia and the rising price of crude, while later in the day statistics will run the show.

­On Wednesday, Russian indices were in a bullish mood amid a positive economic background and growing oil prices. Europe’s January manufacturing statistics were published during the day, reporting an increase of 0.7%, significantly higher than market players had expected. As a result, Russian indices ended the day in positive territory, with the MICEX adding 1.7% up to 1,537.90 and the RTS growing 1.9% to 1,612.70.

Thursday will also see the release of some important news: The eurozone’s GDP for Q4 2012 and the entire last year are going to be published, as well as the GDPs of most individual eurozone countries. It is expected that in October through December of 2012, the economies of eurozone countries shrank 0.4% – up from a 0.1% contraction in the previous quarter – losing 0.7% over the year. Greek unemployment data for November is also expected, though it likely won’t bring any good news.

US stocks finished an uninspired day of trading Wednesday amid slowing retail sales and slightly upbeat earnings reports, resulting in the Dow Jones declining 0.3%, the S&P 500 rising 0.1% and the Nasdaq growing 0.3%. On Thursday, US stocks will react sharply to the forthcoming employment data. Initial unemployment claims are likely to continue their downward trend and decline 6,000 to 360,000, with official statistics to be published later in the day. Fresh data on natural gas reserves is also expected on Thursday.

Asian stocks traded in the black amid new Japanese GDP data, which decreased 0.4% in Q4 2012 compared to 3.8% in Q3. Despite expectations that the GDP figures would improve, the reaction was generally positive, and growth was also given a potential boost by decisions by the Bank of Japan on key interest rates.

Oil prices continued to climb upwards after Wednesday’s data on US oil reserves, which saw significantly lower than expected growth. Brent closed at $118, and will likely grow on Thursday, supporting Russian stocks.

Reports indicating that Americans have invested more in equity funds here in 2013 than they did all last year have given rise to talk of the "Great Rotation". The idea is that Americans are selling fixed income investments bought during the financial crisis and now buying shares.

We are less sanguine. There is a third asset class that needs to be integrated into the analysis: cash. After surveying the data and various reports, it looks to us that the flows into equities is not coming out of fixed income but rather money market funds and deposits.

At the end of last year, perhaps spooked by the pending fiscal cliff and policy paralysis, many investors boosted cash (money market and deposits) holdings. One estimate had cash holdings rising by about $350 bln in the Nov-Dec period and about $165 bln has flowed since the start of the year.

Through last week, equity funds (counting ETFs) saw an inflow of around $70 bln (compared with $23 bln in all of 2012). The $30 bln inflows being reported by bond funds is a major argument against the "Great Rotation", though this is a bit off the pace seen last year ($40 bln inflows during the same period).

Drilling down a bit deeper may offer greater insight into what investor are doing. Of the $70 bln that went into equity funds (and ETFs), about 40% went international/global funds, which is more than half they took in all last year. Among bonds, about 40% also went to emerging markets, which is roughly tracking last year's record pace.

Lipper reported that in the week ending Feb 6, equity funds (mutual funds and ETFs) saw $6.1 bln in new inflows. It was the seventh consecutive week of inflows. Of this sum, $2 bln as in ETFs. However, Lipper notes that the SPDR S&P 500 ETF fell from top position the previous week to last on the back of $3 bln of redemptions. The iShares Russell 2000 index was on top with $700 mln inflow, followed by ishares Dow Jones Real Estate ETF, which took in $600 mln.

Traditional open-ended equity mutual funds saw inflows of $4.1 bln. According to Lipper data, the 5-week inflow of almost $25 bln is the largest inflow for such a period since the beginning of Q2 2000. Domestic funds, led by large cap, drew $1.1 bln. Global and international funds reported inflows of $3.1 bln. Emerging market funds saw $1.8 bln inflows. Lipper notes this was the fifth consecutive week that emerging market funds drew more than $1 bln.

Many Asian bourses have reported strong inflows (greater than last year) thus far this year. In terms of the biggest gain from the year ago period, investors have bought almost $1.1 bln of Indonesian shares, which represents. In terms of dollar amount, Japan of course is the largest bourse and in play, given the yen's weakness. Foreigners have bought about $14.1 bln of Japanese shares this year, which is 135% above the year ago pace. India is also a large beneficiary of foreign purchases. The $7.6 bln that has flows in represents a 725 increase from a year ago.

On the other side, South Korea is a significant exception. Foreign investors have sold about $1.5 bln of Korean equities. The appreciation of the won against the yen appears to have contributed to the profit-taking. Taiwan and Thailand have seen inflows ($1.6 bln and $22 mln respectively), but are well off last year's pace.

That said, we note that the Korea's Kospi appears to have bottomed at the second half of last week. The 2.5% bounce has brought it to a trend line drawn off the Jan 3 and Jan 23 highs. The next target is near 1985 (closed near 1976 today). Longer-term, a recovery could see 2040-2050. The technical condition looks favorable as the RSI has turned higher and the MACDs are crossing.

Investors in Russia are expected to remain positive on Wednesday, with analysts expecting solid manufacturing data from Europe and retail figures from the US.

“… One should expect a minor growth of Russian shares at the start of trading, as well as significant dynamics after important macro statistics from Europe and the USA comes,” Investcafe analyst Grigoriy Birg wrote in an e-mail.

On Tuesday, Russia's key indices finished in the black: The RTS rose 0.03% to 1,582.35 and the MICEX went up 0.23% to 1,515.49.

Among important data set to be released on Wednesday are the figures for December industrial production in the eurozone, with month-to-month dynamics largely expected to show a 0.2% growth. “However, after a November 0.3% contraction this should support the markets,” Birg explained.

The US is also scheduled to produce its January retail sales figures, not including car sales. “Any information, proving growth of consumer demand in the US will cause positive investor reaction,” Birg said.

The Obama Administration made it clear that the Democrats were ready to produce a game plan to escape the 'fiscal cliff,' including a combination of higher taxes and lower government spending.

“Overall, a systematic approach to resolving the problem of an excessive budget deficit and state debt is better than the alternative of an automatic $1.2trln spending cuts in the US, which could lead to catastrophic economic aftermath not just in the US but in the world,” Birg said.

European markets finished higher on Tuesday, with shares in France leading the region. The CAC 40 was up 0.99%, while London's FTSE 100 gained 0.98% and Germany's DAX added 0.35%.

Japanese shares are lower today as the Nikkei 225 fell 1.10%. Stock markets in Hong Kong and Shanghai are closed at this time.

Russian traders are likely to be indecisive on Tuesday, as no significant news is expected that could change current economic trends.

­“Taking into account Monday’s decline, today we can expect that Russian stocks will show slight growth in the beginning, but later they can return to negative figures,” Yulia Voitovich from Investcafe said.

With no significant developments on Monday, the main indices in Moscow flipped between positive and negative territory, finishing in the red by the end of the day. The MICEX lost 0.26% and the RTS was down 0.51%. Severstal and Gazprom were among the companies that took the biggest losses.

The Russian Central Bank is holding a meeting on key interest rates on Tuesday, but no changes are expected to be made. Despite calls from both politicians and businesses, interest rates in Russia will remain high as the Central Bank fights inflation.

Deputy CEO of the Central Bank of Russia Aleksey Ulyukaev said in Davos in January that there was no point using monetary stimulation to boost the economy, as the current level of growth more or less matched the economy's potential – cutting rates would therefore produce few economic benefits.

“The rates will stay unchanged, and the government statements are just a message to manufacturers and companies to support their optimism,” Natalia Orlova, chief economist at Alfa-Bank, told Finmarket earlier.

The main US stock indices ended the Monday session slightly in the red. The Dow Jones declined 0.16%, while the S&P 500 and NASDAQ fell just 0.06%.

In Europe, the UK's FTSE100 went up 0.21%, the German DAX slid 0.24% and the CAC40 rose 0.56%.

The UK and Switzerland's Consumer Price Index (CPI) for January are set to be released on Tuesday, with a slight decline expected from last month figures, at 0.3% and 0.5% respectively. The UK will also release its Producer Price Index (PPI) for January, which is likely to rise 0.9%.

At Monday’s euro group meeting it was decided that conducting a speedy, independent audit of how banks in Cyprus were implementing anti-money-laundering laws might be on the table before a decision is made on providing an aid package.

Asia's main stocks are trading in black, with the Hang Seng growing 0.16%, the Nikkei adding 2.39% and the Shanghai Composite going up 0.57%.

In case there was any doubt that the European circus could get any more ridiculous, here comes Spain's uber-unpopular Prime Minister Mariano Rajoy, already embroiled in a massive kickback political scandal, with a quote that just blows everyone away: "I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets." And scene as your frontal lobe explodes.

Answering reporters’ questions for the first time since details emerged late last week about an alleged slush fund his Popular Party (PP) controlled, Prime Minister Mariano Rajoy said on Monday in Berlin that all the information that has been published by the media “is untrue — except for some things.”

The somewhat confusing statement came during a question-and-answer session Rajoy held alongside German Chancellor Angela Merkel following their meeting to discuss Spain’s economy and the reforms being carried out by his government.

“I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets,” the 57-year-old prime minister said.

The conservative leader did not clarify what things he believes are false, nor did he answer a Spanish reporter’s question as to who he or his party plan on suing for alleging that many officials, including himself, were given bonuses from a secret fund on top of their regular salaries.

...

On Saturday, Rajoy appeared before the cameras to refute the allegations, but reporters were kept in a separate room and not allowed to ask the prime minister any questions.

A visibly upset Merkel had to respond on two occasions to questions about the ongoing corruption cases in Spain, including an uncomfortable mention about illegal financing in her conservative Christian Democratic Union in 1999, when Helmut Kohl was leader. At one point she tried to avoid answering a reporter’s question on whether she was concerned about Spanish corruption.

“What is important is the relationship between the two governments,” she said.

Meanwhile, more PP officials have come forward to acknowledge the information contained in Bárcenas’ bookkeeping. Santiago Abascal, a former PP member of the provincial parliament in Álava, whose name appears as receiving two million pesetas [about 12,000 euros] in 1999, said he asked the party for the money after his business was attacked by terrorists. “I told the party that I couldn’t make ends meet and they gave me two million pesetas,” he said.

Luckily, while it is governed by pathological liars, Spain would never lie about its Services PMI number, the key reason for the overnight 100 pips and Dow Jones futures move higher.

The best news: Europe is truly "fixed", if only in the football game context.

It was the deep of winter... CNBC was talking about "animal spirits", had just touted "the best January in 14 years", was quoting Raymond James' Jeff Saut as saying that "The market "is amazingly resilient, and is no longer overbought" and desperately doing everything it could to get retail back into stocks, and was succeeding: retail inflows into stocks were surging and seemed unstoppable... The Chicago PMI had just printed at its highest level in decades... the VIX was dropping fast... Stocks were soaring... Bonds were sliding... NYSE margin debt had just risen to the highest level since 2008... A few brief months earlier the Fed had unleased a new, massive round of unsterilized bond buying... Bank of America was blaring about the "great rotation" for stocks, and yes - just shortly prior "global currency warfare" had broken out. Name the year?

If you said 2013, you would be right. And wrong.

Because the right answer is... 2011.

That's right: with institutional and trader memories so short, everyone has (again) forgotten that it truly is deja vu, all over again.

To wit:

Stock performance in the winter of 2011 and the winter of 2013:

Bond performance in the winter of 2011 and the winter of 2013:

NYSE margin debt - euphoria and leverage upon leverage was contagious... in January 2011 and January 2013:

Fund Flows into equities were unstoppable. Yes - that was 7 consecutive weeks of major equity inflows into stocks... back in January 2011.

The Dow Jones Industrial Average rose 68.23 points, or 0.6 percent, to close at about 11891.93, after falling 1.4 percent on Friday. For the month, the Dow gained 314.42 points or 2.72 percent, its best January performance since 1997 and its first January gain in four years.

The market "is amazingly resilient," Jeffrey Saut, chief market strategist at Raymond James, told CNBC.com. "After what happened on Friday you would have expected a second shoe to fall."

But, Saut said, the markets had been due for a correction for sometime, and had been indicating one was on the way. After the sell-off, however, the market is no longer "overbought," he said.

Saut remains bullish and one of his favored sectors are banks, which he had not bought for 10 years until last November. Since then, banks, as measured by the Financial Select SPDR Fund , have risen more than the S&P 500 on a relative basis.

"I think that is extraordinarily positive for the equity markets and the economy," he said.

"An “international currency war” has broken out, according to Guido Mantega, Brazil’s finance minister, as governments around the globe compete to lower their exchange rates to boost competitiveness." Welcome to the new frontline. It is being played out at every 500x levered FX trade station. No prisoners are taken as those wounded are immediately shot. And the incursions have now entered stocks and bonds. Trading any assets is now retaliation against a central bank somewhere (most typically at Liberty 33 or at the Marriner Eccles building) which is engaged in open warfare against the world's middle class. And yes, the Brazil Central Bank earlier announced that it was heading unto the breach, buying yet more dollars for 1.7094 reais at auction, and has bought as much as $1 billion USD each day for the past two weeks, putting the Japanese intervention from two weeks ago to shame.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

So why is 2013 nothing but a verbatim, carbon copy of 2011?

Simple: between the Fed, the propaganda of "great rotations" and "massive" inflows into stocks, despite the endless decoupling of fundamentals with the market, all that the status quo was desperate to accomplish was to push the responsibility of keeping the market afloat away from the Fed and on the shoulders of retail investors.

What the Fed did not realize then, and does not realize now, is that the US consumer no longer has the disposable cash to push stocks any higher because while to some 1% of the economy the wealth is indeed tied to stocks, for the balance unless the economy, the jobs, the wages and all those other conventional things that determine inbound cash pick up as well, which they did not in 2011 and they certainly have not in 2013, the US consumer simply will not be able to pick up where the Fed leave off.

Which is why the Fed failed in 2011. It will fail again this time. But yes, the market is higher now than it was in 2011, why? Here's why.

The Case-Shiller Home Price Index is unique among other economic data indicators for recommending that analysts focus solely on its Non-seasonal adjusted data series, as this is what the report uses in its own headline figures. It adds that "for analytical purposes, S&P Dow Jones Indices publishes a seasonally adjusted data set covered in the headline indices" - a far cry from the BLS, whose Arima X 12 models are the basis of the data "moves" on a monthly basis: moves which are based not so much in the underlying data but on the seasonal adjustment and fudging the government employees apply to it. And it is the unadjusted Case Shiller data that showed that in November, the 20 City Composite index posted its second consecutive monthly price decline in a row. Yes: on a year over year basis home prices did rise some 5.5%, but on the other hand, "average home prices across the United States are back to their autumn 2003 levels for both the 10-City and 20-City Composites." And while the price decline into the year end is somewhat seasonal, it certainly does not fit with all the other economic data released by the government showing a housing picture so bright not even the tiniest drops in prices were allowed.

And in what is the biggest paradox for homebuyers in New York, Case Shiller reported that of the 20 cities tracked, home prices rose everywhere... except New York, yet oddly enough it is in NY that the uber-wealthy from China and Russia come to park their money and buy any $50 million + available duplex, triplex and quadruplex regardless of price, and where the bubble at the ultra expensive end of the market is raging like never before (not to mention the record December Hamptons real estate prices).

Perhaps just as importantly, the bubble is back in the west:

In the 12 months ended in November, prices rose in 19 of the 20 cities and fell in New York. In 19 cities prices rose faster in the 12 months to November than in the 12 months to October; Cleveland prices rose at the same pace in both time periods. Phoenix led with the fastest price rise – up 22.8% in 12 months as it posted its seventh consecutive month of double-digit annual returns.

Keeping it real, Vegas - the biggest housing bubble pop in history, saw home prices rise 10% Y/Y, while Detroit was up 11.9%. One word (Un)sustainable.

Global investors are currently holding off on making any drastic moves as they await a series of labor reports later this week.

"People are reluctant to pull the trigger one way or the other until we get more clarity," J.J. Kinahan, chief derivatives strategist at TD Ameritrade, told CNN Money.

A Federal Reserve meeting scheduled for this week may also serve as another motivating factor for investors, Liliya Brueva of Investcafe added.

On Monday, Russian stocks closed on a positive note: The RTS rose 1.03% to 1,635.50 and the MICEX moved up 1.22%to finish at 1,562.93.

“Our [Russian] trading received a growth impulse from the positive news from China, where industrial companies have registered increased income for the fourth consecutive month,” Brueva explained.

Industrial earnings in China surged 20.4% in Q4 after negative growth over the first three quarters, according to the country’s National Bureau of Statistics.

Trading on Wall Street was mixed on Monday: The Dow Jones declined 0.1% and the S&P 500 lost 0.2%, while the Nasdaq added 0.1%.

Earlier gains on US floors, which hit new five-year highs on the back of strong corporate earnings, were hampered by “some conflicting economic data showing worse than expected pending home sales data, which came after some strong durable goods data that had initially given markets a bit of a boost,” explained Angus Campbell, head of market analysis for Capital Spreads.

The Census Bureau reported that orders for durable goods rose 4.6% in December, an increase over the 1.6% growth forecast by economists. The index of pending home sales also fell 4.3% during the same period; the index is based on the number of hosing contracts signed in a month, but does not measure actual closings.

European stocks closed mixed on Monday: The FTSE 100 gained 0.16%, the CAC 40 rose 0.07% and the DAX lost 0.32%.

Asian markets also finished mixed: The Shanghai Composite added more than 2%, closing at its highest level since June, while the Nikkei lost about 1%. The Hang Seng in Hong Kong also traded slightly higher.

Russian investors are expected to be looking overseas, where the US stats are set to be a major newsmaker during the entire week. On Monday the world’s biggest economy will release its December durables figures.

“During the day Russian floors will be mostly focusing on an overall news environment and the way foreign investors behave,” according to Yulia Voitovich, an analyst at Investcafe.

As for the US durable report, analysts expect a 1.8% month-to-month increase of the December figure. “Excess of the actual reading above the expected could support the world stock indicators,” she added.

And given positive closure of Friday trading in the US and mostly in Asia, Russian stocks may also open higher on Monday, Voitovich said.

Domestic markets were positive on Friday. The RTS added 0.01% to 1, 618.84 and the MICEX was up 0.88% to 1,618.84.

Asian stocks are mostly up in early Monday trading, with Shanghai Composite going up 1.5%, Hang Seng rising 0.51% and just Nikkei going down 0.08%.

In Wall Street news, the most anticipated block of unemployment data is set to be released on Friday. The Labor Department releases its first monthly employment report for 2013.

Overall, unemployment is now one of the key economic issues the US authorities target. So far the unemployment rate has remained above and beyond a desirable figure. Last year it held steady at about 7.8%, while 6.5% serves is the target.

Stocks in the US ended last week on a positive note, with the Dow Jones adding 1.8%, the S&P rising 1.1% and Nasdaq going up 0.5%.

European markets finished broadly higher on Friday, where Germany leads the region. The DAX was up 1.42% while France's CAC 40 added 0.69% and London's FTSE 100 rose 0.31%.

Russian markets are expected to open in the red following a rather controversial trading day on Thursday. Both key Russian indices dropped, with the RTS lowering by 0.04% and the MICEX sliding by 0.24%.

Friday’s trading will greatly depend on external moving factors as no major corporate news is expected in Russia. It’s most likely the market will show slight correction due to lack of significant reasons for the growth, which, however, may appear at the beginning of next week.

European markets finished mostly higher on Thursday. The FTSE 100 was up 1.09%, while France's CAC 40 is up 0.70% and Germany's DAX was up 0.53%.

North American markets finished mixed to lower. The Dow Jones rose by 0.33%, while the S&P 500 closed unchanged.

The US market will also depend on the statistics coming throughout the day. Real estate market data is expected to arrive with predicted increase in new homes sales to grow from 377,000 in November to 388,000 in December. However, investor sentiment will largely depend on the issuing of annual corporate reports. Consumer companies are expected to share their data, including a much-anticipated report from P&G.

Asian markets are mixed. The Nikkei 225 is trading 2.28% higher, while the Hang Seng is leading the Shanghai Composite lower. They are down 0.32% and 0.22% respectively.

Russian indices are expected to grow further on Thursday following a successful trading day earlier. The RTS grew by 1.3% and the MICEX gained 0.8%.

­The majority of Russian blue chips were also on the rise with Norilsk Nickel in the lead with +1%, Sberbank, Gazprom and Lukoil stocks rose 0.95%, 0.55% and 0.09% respectively.

No major corporate events are expected today in Russia and stocks will primarily focus on foreign colleagues when determining the motion vector for the day.

European stock exchanges closed in the mix on Wednesday. The FTSE 100 gained 0.30% and the DAX rose 0.15%, the CAC 40 lost 0.40%.

Markets in Asia are also in mixed territory. The Nikkei 225 is higher by 0.81%, while the Shanghai Composite is leading the Hang Seng lower. They are down 0.17% and 0.16% respectively.

North American stocks showed positive trading with the Dow Jones gaining 0.49%, the S&P rising by 0.15% and the NASDAQ climbing up by 0.33%. American indices gained support from the ongoing season of annual corporate reports. Data posted by Google, IBM and McDonalds came in higher than expected, which stimulated the trading of some indices. Miscrosoft, Starbucks and Xerox are expected to deliver their reports later today. Also the US is to publish unemployment index and oil reserve data on Thursday.

Some time ago when we looked at the the performance of the world's largest and best returning hedge fund, Ray Dalio's Bridgewater (split roughly evenly between his Pure Alpha and All Weather strategies), it had some $138 billion in assets. This number subsequently rose by $4 billion to $142 billion a week ago, however one thing remained the same: on a dollar for dollar basis, it is still the best performing and largest hedge fund of the past 20 years (assuming of course, JPM's $350 billion AUM Whale office has finally been "beached" and its positions unwound), and one which also has a remarkably low standard deviation of returns to boast. This is known to most people.

What is less known, however, is that the two funds that comprise the entity known as "Bridgewater" serve two distinct purposes: while the Pure Alpha fund is, as its name implies, a chaser of alpha, or the 'tactical', active return component of an investment, the All Weather fund has a simple "beta isolate and capture" premise, and seeks to generate a modestly better return than the market using a mixture of equity and bonds investments and leverage.

And while we absolutely agree with Dalio that "there is a way of looking at things that overly complicates things in a desire to be overly precise and easily lose sight of the important basic ingredients that are making those things up" (they need those Econ PhDs for something), we certainly don't agree with Bob Prince's assessment that the entire world is merely a "machine" which can be understood, in terms of its cause-effect linkages.

While this may be true in simple two actor environments, and in theoretical, textbook markets, it is certainly not the case in a enviornment filled with irrational actors, who respond in times of crises - so vritually all market inflection points - with their feelings, instincts, phobias and gut reactions, than with anything resembling logic and reason. And especially not in times of "New Normal" central planning.

Then again, it is Prince and Dalio who are multi-billionaires and run a $125 billion hedge fund, so perhaps they are on to something...

The annotated presentation of how one half of Bridgewater's bread and butter operates:

And the unabridged:

The All Weather Story

How Bridgewater associates created the all weather investment strategy, the foundation of the ‘risk parity’ movement

President Richard Nixon sat in the Oval Office staring into a television camera and addressed the nation: “I directed Secretary Connelly to suspend temporarily the convertibility of the dollar into gold.” After 27 years of relative monetary stability, the United States was breaking from the Bretton Woods system of fixed exchange rates that had tied the dollar’s value to gold.

Ray Dalio, fresh out of college, was then a clerk on the New York Stock Exchange. Watching Nixon’s speech in his apartment, he tried to fathom the implications. Paper money derived its value from being a claim on gold. Now those claims wouldn't be honored. The next morning he walked on to the chaotic floor of the NYSE expecting stocks to plummet. Instead the Dow Jones Industrial Average rose almost 4% and gold shot higher in what was later dubbed the “Nixon rally.” Ray had heard Nixon’s announcement but misunderstood its implications.

This event transformed Ray’s thinking about markets. Nothing like it had ever happened to him before, so it came as a shock. He quickly realized he couldn’t trust his own experience: anyone’s lifetime is too narrow a perspective. So he began to study the cause-effect linkages at work in the dollar devaluation and subsequent market pop. He discovered the Bretton Woods breakup was one of many seemingly unique occurrences that, in truth, are more infrequent than unprecedented. A broader perspective revealed that currency devaluations had occurred many times throughout history and across countries, and were the result of the same essential dynamics playing out under different circumstances. Ray dedicated himself to understanding what he would in time call the ‘economic machine’: the timeless and universal relationships that both explain economic outcomes and repeat throughout history.

Ray is now in his 60s. He founded Bridgewater Associates four years after the Nixon speech. Reflecting back on that incident, Ray said, “that was a lesson for me. I developed a modus operandi to expect surprises. I learned not to let my experiences dominate my thinking; I could go beyond my experiences to see how the machine works."

Ray realized he could understand the economic machine by breaking down economies and markets into their component pieces, and studying the relationships of these pieces through time. This type of thinking is central to All Weather. For instance, any market move can be broken down into a few key components. Markets move based on shifts in conditions relative to the conditions that are priced in. This is the definition of a surprise. The greater the discrepancy, the larger the surprise. That explained the Nixon rally. When countries have too much debt and their lenders won’t lend them more, they are squeezed. They, in this case the US, invariably print money to relieve the squeeze. The unexpected wave of new money cheapens its value and alleviates the pressure from tight monetary conditions sending stocks and gold higher. What Ray observed was 'another one of those' - a shift in conditions relative to what people had expected.

The principles behind All Weather relate to answering a deceptively straight-forward question explored by Ray with co-Chief Investment Officer Bob Prince and other early colleagues at Bridgewater - what kind of investment portfolio would you hold that would perform well across all environments, be it a devaluation or something completely different?

After decades of study Ray, Bob, Greg Jensen, Dan Bernstein and others at Bridgewater created an investment strategy structured to be indifferent to shifts in discounted economic conditions. Launched in 1996, All Weather was originally created for Ray’s trust assets. It is predicated on the notion that asset classes react in understandable ways based on the relationship of their cash flows to the economic environment. By balancing assets based on these structural characteristics the impact of economic surprises can be minimized. Market participants might be surprised by inflation shifts or a growth bust and All Weather would chug along, providing attractive, relatively stable returns. The strategy was and is passive; in other words, this was the best portfolio Ray and his close associates could build without any requirement to predict future conditions. Today the All Weather strategy and the concepts behind it are fundamentally changing how the biggest capital pools in the world manage money. What began as a series of questions has blossomed into a movement. This article tells the story of how All Weather came into being. It recounts how a series of conversations hardened into principles that are the foundation of a coherent and practical investment philosophy.

A Discovery Process

Ray founded Bridgewater in 1975 in his New York City brownstone apartment. At the time, he actively traded commodities, currencies and credit markets. His initial business was providing risk consulting to corporate clients as well as offering a daily written market commentary titled Bridgewater Daily Observations that is still produced. The competitive edge was creative, quality analysis.

Among his clients were McDonalds and one of the country’s largest chicken producers. McDonalds was about to come out with Chicken McNuggets and was concerned that chicken prices might rise, forcing them to choose between raising their menu prices or having their profit margins squeezed. They wanted to hedge but there was no viable chicken futures market. Chicken producers wouldn’t agree to sell at a fixed price because they were worried that their costs would go up and they would then take a loss on their supply contracts. After some thought, Ray went to the largest producer with an idea. A chicken is nothing more than the price of the chick (which is cheap), corn, and soymeal. The corn and soymeal prices were the volatile costs the chicken producer needed to worry about. Ray suggested combining the two into a synthetic future that would effectively hedge the producer’s exposure to price fluctuations, allowing them to quote a fixed price to McDonalds. The poultry producer closed the deal and McDonald’s introduced the McNugget in 1983.

This early work reflected a truth. Any return stream can be broken down into its component parts and analyzed more accurately by first examining the drivers of those individual parts. The price of poultry depends on the price of corn and soymeal. The price of a nominal bond can be broken down into a real yield and an inflation component. A corporate bond is a nominal bond plus a credit spread. This way of thinking laid the groundwork for constructing All Weather. If assets can be broken down into different component parts and then summed up to a whole, so too could a portfolio.

Portfolio Building Blocks

In time, Ray and Bob set their sights on managing liabilities, not merely advising on what to do with them. For any asset there is a corresponding liability and, relative to asset management, liability management appeared to be an underserved market. There was a long education process to convey the value proposition to a corporate treasurer, however. To do so, Ray, Bob and others would write a “Risk Management Plan.” These were tailored analyses that generally followed three steps; a) identify the risk neutral position for the corporation b) design a hedging program to reach that exposure and c) actively manage around that exposure, hiring Bridgewater and paying them based on performance around this neutral position. Over time this approach had Ray, Bob and others managing $700 million in corporate liabilities.

The evolution to managing assets occurred in 1987. The World Bank pension fund had been following Bridgewater‘s research. On the basis of this research and Bridgewater's track record managing liabilities, they opened a $5 million bond account. Given the decade plus of experience managing liabilities, Bridgewater approached the asset portfolio in the same way. The bond benchmark was the risk neutral position; the active management was the value added, or alpha, gained from deviating from the benchmark. The two are completely separate.

This is an important insight. While there are thousands of investment products, there are only three moving parts in any of them. Consider buying a conventional mutual fund. The investment may be marketed as a ‘large cap growth fund.’ The reality is that the return of that product, or any product, is a function of a) the return on cash b) the excess return of a market (beta) above the cash rate and c) the ‘tilts’ or manager stock selection (alpha). The mutual fund blurs the distinction between the moving parts, which makes it hard to accurately assess the attributes of any one part or the whole. In summary:

return = cash + beta + alpha

Many people, perhaps most, don’t look at investment returns from this perspective and as a result miss a lot. The cash rate is after all controlled by a central bank, not the investor, and can move up or down significantly. In the US after peaking above 15% in the 1980s, cash rates are now zero. Stocks and bonds price relative to and in excess of cash rates. A 10-year bond yield of 2% is low relative to history but high relative to 0% cash rates. What is unusual about the recent environment is the price of cash, not the pricing of assets relative to cash.

The characteristics of betas and alphas are distinct. Betas are few in number and cheap to obtain. Alphas (i.e. a trading strategy) are unlimited and expensive. The most important difference is the expected return. Betas in aggregate and over time outperform cash. There are few ‘sure things’ in investing. That betas rise over time relative to cash is one of them. Once one strips out the return of cash and betas, alpha is a zero sum game. If you buy and I sell, only one of us can be right. The key for most investors is fixing their beta asset allocation, not trading the market well. The trick is to figure out what proportion of stocks, bonds and commodities to hold such that a static portfolio is reliable. That is the question (‘what kind of investment portfolio would you hold that would perform well across all environments”) Ray, Bob, Dan and others were trying to answer. The first step was to separate out the beta from cash and alpha.

Balancing and Risk-adjusting Assets

By this time Bridgewater had decamped from Manhattan to rural Connecticut, eventually ending up in Westport. Now that Bridgewater was managing pension assets, other pension funds began exploring Bridgewater’s capabilities. Among those for whom Bridgewater provided advice was Rusty Olson, the CIO of a large US-based consumer goods manufacturer pension plan. Rusty asked what Bridgewater thought about his plan of using long duration zero coupon bonds in the pension portfolio. Ray gave a quick answer on the spot, suggesting it was a great idea but that they should use futures to implement it so that they could create any duration they desired. Ray said he would get back to Rusty with a more fully fleshed out idea. The brainstorming happened on a Friday. Merely getting asked the question was a coup. Not that long ago Bridgewater had been a niche investment adviser and at the time it had very little money under management. Now an iconic CIO was asking their counsel. Ray, Bob, Dan and a few other Bridgewater employees at the time worked all weekend to get Rusty an answer on how to do this best.

Step one in the pension analysis was breaking down this manufacturer’s pension portfolio into the three key components described above (cash or the risk free position, beta, and alpha). The typical institutional portfolio had (and still has) roughly 60% of its dollars invested in equities and as a result almost all of its risk. The rest of the money was invested in government bonds as well as a few other small investments, which are not as volatile as the stocks. This is the type of asset allocation many investors held at the time and remains the basic advice many investors still adhere to. Rusty was an innovative thinker and had begun deviating from conventional wisdom by trying to construct a high-returning portfolio out of uncorrelated returns, while maintaining a high commitment to equities. Rusty was struggling with what to do about nominal zero coupon government bonds. He thought they had too low a return to justify a place in his portfolio and were cash intensive, yet, at the same time, he correctly feared his portfolio was vulnerable in a deflationary economic contraction. So he had begun a program to protect his portfolio using long duration treasury bonds, which used much less cash than normal bonds. He wondered what Bridgewater could add to this approach.

Bridgewater's response documented two key ideas that would later reappear in All Weather – environmental bias and risk balancing assets. Ray, Bob and others knew that holding equities made an investor vulnerable to an economic contraction, particularly a deflationary one. The Great Depression was the classic example of this. Stocks were decimated. It was also true as Rusty suspected that nominal government bonds provided excellent protection in these environments. The goal was an asset allocation that didn’t rely on predicting when the deflationary shift would occur but would provide balance nonetheless.

The 1990 memo to Rusty put it this way, “Bonds will perform best during times of disinflationary recession, stocks will perform best during periods of … growth, and cash will be the most attractive when money is tight.” Translation: all asset classes have environmental biases. They do well in certain environments and poorly in others. As a result, owning the traditional, equity heavy portfolio is akin to taking a huge bet on stocks and, at a more fundamental level, that growth will be above expectations.

The second key idea stemmed from their work helping corporations hedge unwanted balance sheet exposures. Ray, Bob, Dan and others always thought first about risk. If the risks didn’t offset, the client would be exposed. Due to his equity holdings Rusty was exposed to the risk that growth in the economy would be less than discounted by the market. To 'hedge' this risk, the equities needed to be paired with another asset class that also had a positive expected return (i.e. a beta) but would rise when equities fell and do so in a roughly similar magnitude to the decline in the stocks. The Bridgewater memo agreed that Rusty should hedge this risk with long duration bonds that would have roughly the same risk as his stocks. Quoting from the study: “low-risk/low-return assets can be converted into high-risk/high-return assets.” Translation: when viewed in terms of return per unit of risk, all assets are more or less the same. Investing in bonds, when risk-adjusted to stock-like risk, didn’t require an investor to sacrifice return in the service of diversification. This made sense. Investors should basically be compensated in proportion to the risk they take on: the more risk, the higher the reward.

As a result of this work, Ray wrote Rusty, “I think your approach to managing the overall portfolio makes sense. In fact, I would go so far as to say that I think it makes more sense than any strategy I have seen employed by any other plan sponsor.” The long duration bonds, or futures equivalents, would make the portfolio roughly balanced to surprises in economic growth while not giving up return. Bridgewater began managing Rusty’s bond portfolio and also overlaid their own alpha (this portfolio became their first ‘alpha overlay’ account).

Balancing Growth and Inflation

Over time these discrete discoveries - breaking a portfolio into its parts, recognizing environmental biases, risk adjusting asset classes – began to harden into principles, concepts that could be applied over and over again. Running these portfolios in real time, particularly through economic shocks ranging from stock market crashes to banking crises to emerging market blow ups reinforced a confidence in the principles. Yet, there were a few additional insights that would come before All Weather would grow into a mature concept. A key step was framing growth and inflation as the environmental drivers that mattered and mapping asset classes to these environments.

Ray, Bob and their other close associates knew stocks and bonds could offset each other in growth shocks, such as they had mapped out for Rusty. They also knew there were other environments that hurt both stocks and bonds, such as rising inflation. That was obvious because they lived through these shifts. For a 1970s style environment it was much better to hold commodities than it was to hold stocks and nominal bonds. This notion was rattling around in conversations and became fully formed for Bob in a simple experiment.

Since the invention of the PC early Bridgewater employees had utilized technology to collect and chart data and process decision rules. They called these rules 'indicators.' These were the ‘timeless and universal’ linkages Ray had set out to understand in the 1970s. A PC was a big step up in efficiency from a slide rule or an HP hand-held calculator and graphs plotted by hand with colored pencils, which was what they used early on. Bob was fiddling around with a new computer program, Microsoft Excel. Microsoft had released the first windows based version of it in 1987. With these tools Bob began playing around to see how shifting asset weights would impact portfolio returns. He found that the best performing portfolio was 'balanced' to inflation surprises. This made some sense coming after the inflationary 1970s and the dis-inflationary 1980s. It also held true for more extreme shocks, like the 1920s German hyperinflation or the US Depression. Bob shared his discovery with Ray. “I showed it to Ray and he goes, ‘that makes sense,’” Bob recalled years later. “Then he goes, ‘But it really should go beyond that, it should really also be balanced to growth.’”

This was classic Bridgewater. Though the ‘data’ indicated one thing (to balance assets via inflation sensitivity) common sense suggested another. The message - don’t blindly follow the data. Ray proceeded to sketch out the four boxes diagram below as a way of describing the range of economic environments any investor has faced in the past or might face in the future. The key was to put equal risk on each scenario to achieve balance. Investors are always discounting future conditions and they have equal odds of being right about any one scenario.

This diagram tied key principles together and became a template for All Weather. Much as a portfolio can be boiled down to three key drivers, economic scenarios can be broken down to four. There are all sorts of surprises in markets, but the general pattern of surprises follows this framework, because the value of any investment is primarily determined by the volume of economic activity (growth) and its pricing (inflation). Surprises impact markets due to changes in one or both of those factors. Think about any stress scenario and it ends up putting a portfolio in one or two of these sectors unexpectedly. The 1970’s oil shocks, the disinflation of the 1980’s or the growth disappointments post 2000 were all shifts in the environment relative to expectations. This framework captured them all. More importantly, it captured future, yet unknown surprises. There were many economic surprises after Bridgewater started running All Weather, and they were different from the surprises that preceded the strategy but the strategy weathered them all. The framework is built for surprises in general, not specific surprises, the very issue Ray had been wrestling with at the outset.

Initially the four box framework was used to explain alpha diversification with prospective clients. The framework explained the concept in such an intuitive and clear way that it became the starting point of their conversations. To be sure, at this time the focus of the key Bridgewater personnel was on alpha, not beta. To do so, Ray, Bob and Dan were obsessed with identifying and articulating timeless and universal tactical decision-making rules across most liquid financial markets. The tactical strategy that resulted from this work, Pure Alpha, was launched in 1991, years before All Weather came into being.

The final ingredient: inflation-linked bonds

If Bridgewater is the pioneer of risk parity, it is also true the firm played a critical role in the acceptance of inflation-linked bonds in institutional portfolios. Inflation-linked bonds play an important role in All Weather. The concept of a security whose principal value is tied to inflation dates to at least the 18th century but in the early 1990s inflation-linked bonds were not playing a significant role in institutional portfolios. Like the other discoveries along the way, this one came out of a conversation, or a series of them. A US foundation came to Bridgewater with a question: how could they consistently achieve a 5% real return? By law the foundation had to spend 5% of its money every year, so for it to keep operating in perpetuity it had to generate a 5% real return.

Going back to the building blocks of a given portfolio, the client’s “risk-free position” was no longer cash, but rather a portfolio that provided a real return. Inflation-linked bonds, bonds that pay out some real return plus actual inflation, would ‘guarantee’ this 5% hurdle, as long as one could find bonds paying 5% real coupons. The main problem, however, was that there weren’t any of these bonds in the US at the time. They were issued widely in the UK, Australia, Canada and a few other countries. As currency and bond managers, Ray, Bob and Dan knew how to hedge a bond portfolio back to dollars, eliminating the currency impact. The three of them sought to construct a global inflation-linked bond portfolio and hedge it back to the US dollar as a solution for the endowment. At the time, global real yields were around 4% so a little bit of leverage had to be applied to the inflation linked bonds to reach the endowment’s target.

Through their work for the foundation it became clear inflation-linked bonds were a viable, underutilized asset class relative to their structural correlation benefits. Inflation-linked bonds do well in environments of rising inflation, whereas stocks and nominal government bonds do not. As a result, the bonds filled a diversification gap that existed (and continues to exist) in the conventional portfolio. Most investors do not hold any assets that perform well when inflation surprises to the upside outside of commodities, which tend to comprise a tiny fraction of their overall portfolio. From the environmental perspective Bridgewater established, inflation-linked bonds helped balance out both boxes and other asset classes in a way no other asset class could (inflation-linked bonds are also negatively correlated to commodities relative to growth, an added benefit). Unsurprisingly, when the US Treasury decided to issue inflation-linked bonds, officials came to Bridgewater to seek advice on how to structure the securities. Bridgewater’s recommendations in 1997 led to TIPS being designed as they now are.25 years in the making:

The All Weather Strategy

The fully formed All Weather emerged in 1996 as Ray, Bob and by this point the third CIO, Greg Jensen, who had joined Bridgewater out of college, sought to distill decades of learning into a single portfolio. The impetus was Ray's desire to put together a family trust and create an asset allocation mix that he believed would prove reliable long after he was gone. The accumulation and compounding of the investment principles Bridgewater had discovered, while hedging McNuggets, helping Rusty balance his portfolio, or managing inflation-linked bonds, came together into a real portfolio. The ultimate asset allocation mapped asset classes onto the environmental boxes framework, as shown in the diagram below.

Bridgewater had learned to map asset classes to the environments through study. They also knew that all the asset classes in the boxes would rise over time. This is how a capitalist system works. A central bank creates money, and then those who have good uses for the money borrow it and use it to achieve a higher return. These securities by and large come in two forms: equity (ownership) and bonds (loans). As a result, the boxes don’t offset each other entirely; the net return of the assets in aggregate are positive over time relative to cash. The environmental exposures cancel each other out, which leaves just the risk premium to collect.

Ray described creating the portfolio “like inventing a plane that’s never flown before.” It looked right, but would it fly? He started running a pilot with his assets, and it was someone’s part-time job to rebalance the portfolio from time to time. The portfolio flew the way Bridgewater expected, but it remained purely for Ray’s trusts. All Weather was never envisaged as a product. It was profound enough that no one was doing it but at the same time so straightforward that anyone could seemingly do it for themselves. While US equities were in the early stages of the tech bubble, Ray and others began propounding the concepts of balance, initially to rather indifferent interest.

The crash of 2000 changed that. With the bursting of the bubble came the realization that equities were by no means a “sure thing.” The tech bubble implosion shifted the mindset of the average investor, reminiscent of the disruptions of Bretton Woods, the oil shocks and the 1987 stock market crash. Many money managers began shifting towards alpha (tactical bets) as a way to cope with what they perceived as a now-unstable stock market.

Early Investors

Around that time, Bob began talking with Britt Harris, then CIO of a major corporate pension fund, which was a client of Bridgewater’s. Bob and Britt knew each other from coaching their children together and their children’s’ common nursery school. Britt called Bob up one Sunday and asked about inflation-linked bonds and how they would fit into an investment portfolio. Bob told Britt, “Let me tell you what I would do if I were in your shoes.” The portfolio he described and they built for Britt’s pension plan – as you might expect – was All Weather. It was so unorthodox that Britt insisted on a massive due diligence process, which further helped codify the principles underlying the All Weather approach. As Bob recounts, “Britt said, ’when the regulators come and ask me the question, I want to be able to pull the book off the shelf and show them all the work we did to show that this makes sense.’” The pension fund started with a $200mm allocation.

The second large client to adopt the All Weather approach was a major automobile company. They had just issued pension obligation bonds because they were severely underfunded in the aftermath of the 2001 stock market crash. The CIO wanted to manage this “new money” from the bond issuance in a “new way.” The CIO sent out perhaps 30 letters to the top institutional money managers in the world and ended up hiring five to manage his “new money”; Bridgewater was one of them.

Ray, Bob and Greg advised this company to build a portfolio based on principles the CIO could use for the entire fund: find the best asset allocation, find the best alpha, and then combine the two in such a way so as to reflect your relative confidence in each. The eventual total portfolio ended up being a roughly 70/30 split between beta and alpha (All Weather and Pure Alpha, Bridgewater’s actively-traded portfolio). The novelty was the All Weather component. It was slowly becoming apparent that some of their clients were recognizing the benefits of environmental balance and diversification and would be willing to hire Bridgewater to implement this for them.

To be sure, there was still resistance to the All Weather concepts. Peer risk dissuaded some investors for fear that they wouldn’t track their benchmark or peer group. The idea of leverage also raised questions. Some were wholly unfamiliar with the concepts of financial engineering and therefore were initially uncomfortable with derivative instruments (e.g., futures and swaps). And last, there was a big question over where exactly All Weather would fit in or who would own the profit and loss. However, after nearly a decade of poor performance and the credit crises of 2008, investors were hungry for an alternative. A clever consultant adopted the term “Risk Parity” and created an asset allocation bucket thereby opening the floodgates to strategies that one way or another seek to balance risks in a portfolio.

Gradually objections surrounding All Weather eased. As investors grew accustomed to looking at leverage in a less black-and-white way – “no leverage is good and any leverage is bad” – many have come to understand that a moderately-levered, highly-diversified portfolio is less risky than an unleveraged, un-diversified portfolio. Leverage is an implementation tool. If you can’t predict the future with much certainty and you don’t know which particular economic conditions will unfold, then it seems reasonable to hold a mix of assets that can perform well across all different types of economic environments. Leverage helps make the impact of the asset classes similar.2

The Elegant Solution

Fast forward to today. There is no limit to how the All Weather principles of balance can be applied and over time could perhaps contribute to a more stable financial system. One of the largest Canadian pension plans adopted All Weather as the benchmark for their entire plan. Other organizations have completely revamped their structure into alpha and beta teams. Some are introducing these concepts into defined contribution plans as an investment choice. A recent survey indicated most institutional investors are familiar with the concept and 25% are using it in their portfolio, though that of course means the vast majority of investors aren’t yet using what is effectively new technology.

All Weather grew out of Bridgewater’s effort to make sense of the world, to hold the portfolio today that will do reasonably well 20 years from now even if no one can predict what form of growth and inflation will prevail. When investing over the long run, all you can have confidence in is that (1) holding assets should provide a return above cash, and (2) asset volatility will be largely driven by how economic conditions unfold relative to current expectations (as well as how these expectations change). That’s it. Anything else (asset class returns, correlations, or even precise volatilities) is an attempt to predict the future. In essence, All Weather can be sketched out on a napkin. It is as simple as holding four different portfolios each with the same risk, each of which does well in a particular environment: when (1) inflation rises, (2) inflation falls, (3) growth rises, and (4) growth falls relative to expectations.

Overconfidence often pushes people to tinker with things they do not deeply understand, leading them to over-complicate, over-engineer, and over-optimize. All Weather is built very intentionally to not be that way. With the All Weather approach to investing, Bridgewater instead accepts the fact that they don’t know what the future holds, and thus choose to invest in balance for the long-run. Often Bridgewater people are asked at a cocktail party or a family gathering what to invest in. They don’t delve into the active alpha portfolio. That wouldn’t be useful anyway – the portfolio moves around. What the average person needs is a good, reliable asset allocation they can hold for the long-run. Bridgewater’s answer is All Weather, the result of three decades of learning how to invest in the face of uncertainty. Ray's trust assets remain invested in All Weather.

1. As an example, if you invest $10 in the S&P 500 and $10 in US bonds, the portfolio risk is dominated by the S&P because it is much riskier than the bonds. If instead you invest $5 in the S&P and $15 in 10 year bonds the portfolio is much more balanced, though with a lower return. Invest $5 and $15 in the manner described and add a bit of leverage and the portfolio has the same return as the stocks but less risk.

Russian markets are most likely to open with slight decline after finishing in negative territory on Tuesday.

­Both Russian indices closed in the red, with the RTS dropping 0.7% and the MICEX sliding down 0.8%.

European markets finished lower as well on Tuesday, despite some good news being released. Germany posted its Zew Indicator of Economic sentiment, which came in higher than expected, and eurozone finance ministers approved the next tranche of emergency aid for Greece. The DAX is down 0.68%, France's CAC 40 is lower by 0.59% and London's FTSE 100 is lower by 0.03%.

North American stocks closed in mixed territory with the Dow Jones and the S&P gaining 0.5% and 0.4% respectively, with the NASDAQ dropping 0.1%.

Asian markets are trading low today with all the key indices in red territory. Hong Kong’s Hang Seng is down 0.2%, Japan’s Nikkei is sliding more than 1% and China’s Shanghai Composite is lower by 0.4%.

Brent crude oil is reduced to $ 112.1 this morning, after it overcame a price of $ 112.5 per barrel on the previous day’s trading. An improved macroeconomic situation in Europe, as well as expectations of growth in US oil and petroleum reserves supports the price.

The US dollar begins the week mostly firmer. The notable exception is the Japanese yen, which has seen some position adjustment ahead of the outcome of the BOJ meeting tomorrow. In Asia, and Europe thus far, the dollar has found support near its five day moving average and the 38.2% retracement of its latest leg up (from Jan 16), both of which come in near JPY89.30. The recovery of the yen took a toll on Japanese stocks. The Nikkei lost 1.5% and posted an outside down day (trading on both sides of Friday's ranges and finishing below Friday's low).

The euro has been confined to an exception narrow range of about 15 ticks on either side of $1.3315. A break of support in the $1.3260-80 area would lend credence to our argument that a top of some import is being carved out, with a potential double top at $1.34. Sterling saw follow through selling on top of the pre-weekend losses. The euro traded at 10-month highs against sterling above GBP0.8400, but is reversing lower near midday in London. A modest bounce in cable seen in the European morning ran out of steam near $1.5900, which likely now marks the upper end of the new range.

Equity markets are mixed, with the MSCI Asia-Pacific seeing a 0.2% decline, dragged down by Japanese shares, and to a lesser extent Taiwan, Korea and Malaysia. European bourses are higher with the Dow Jones Stoxx 600 advancing almost 0.5%, led by utilities, basic materials and technology. While the US market is closed today, before the weekend the three main gauges, Dow, NASDAQ, and S&P 500 closed at 5-year highs. This week's earnings feature technology giants Apple, Google, IBM, and United Technologies.

There was a potentially important development in the US fiscal drama. Some Republicans in the House of Representatives are proposing a three-month extension on the debt ceiling to give more time to negotiate a long-term deal. It is not yet immediately clear if the measure has sufficient Republican support--remember Bohener's Plan B?--or if Obama will agree to it, after having the lack of interest in a short-term fix. Still it shows some fluidity of the situation and should ease what little concern that had really been that the US would default.

In a very tight election in Lower Saxony, the real winner, regardless of the formation of the new state government is the Free Democrat Party, and by extension German Chancellor Merkel. Merkel's CDU party depends on a coalition with the FDP, but over the past year, the FDP has been trounced in most state elections. The conventional view that the national election later with year would result in another grand coalition was predicated on the inability of the FDP to deliver. Some feared it would not even meet the 5% threshold to secure parliamentary membership. In Lower Saxony, the FDP defied expectations and received almost 10% of the vote, more than twice what the opinion polls suggested. Yet, FDP party head and Economics Minister Roesler offered to resign and threw his support toward Bruederle, the head of the party's parliament caucus, who is regarded as more dynamic and with some hope he can revive the party's fortunes. A formal leadership decision in May. The SPD and Greens eked out a surprise victory, but Steinbrueck, the SPD candidate for Chancellor, apologized for his gaffes in the national campaign, which may have cost the SPD votes in the local contest.

The most anticipated event of the week is tomorrow's conclusion of the BOJ meeting. The pressure on the BOJ from the new Abe government is widely recognized and with its recent economy assessment, in which most regions were downgraded, the BOJ cannot be content either. There is, therefore, little doubt the BOJ will take action. However, the impact of some of the measures that have been discussed like open-ended QE or a 2% inflation goal is questionable. What does open-ended QE mean when the BOJ has increased the amount of assets it is buying repeatedly ? How is a 2% inflation goal credible when it has failed to achieve its 1% goal? Similarly, a cut in the interest paid on reserves is possible, but it is not clear how that would be inflationary or stimulative. Our fundamental and technical analysis warns that the market is vulnerable to disappointment or a "sell the rumor buy the fact" type of activity. There has been some position adjustment today as the dollar still has not been able to sustain a move above JPY90. In terms of intent, the imagery we still think apropos is blowing (hot) air underneath the (yen's) parachute to increase the likelihood of a soft landing and reduce the antagonism that its strategy engenders.

There are two aspects of the technical condition of that are worth underscoring. First, we think there was significant deterioration of the major foreign currencies, with sterling convincingly violating a 7-month uptrend line, the dramatic weakness of the Swiss franc, and new multi-week lows for the Australian and Canadian dollars. The euro has fared best, but technically appears vulnerable. Second, we note that implied volatility in the currency markets has trended higher in recent weeks. Before the weekend, 3-month euro vol reached its highest level since Oct. It reached a low in late Nov near 6.4% and now is near 8.6%. 3-month yen vol is at its highest level since Sept 2011 near 11.2%. On the eve of the election announcement in mid-Nov, it was near 7%, having bottomed a month earlier near 6.55%. Sterling vol is at its highest level in four months near 7.3%. It bottomed in middle of last month near 5.25%.

The euro area finance minister meet today. Cyprus aid package is not ready and it won't be for at least a couple more months. Greece is progressing towards another tranche amid fresh call from the IMF than even if the country stays on track, it will need another 9 bln euros of assistance (perhaps in the form of further official sector concessions, Merkel has hinted in the latter years of its current program). There may also be some discussion of Spain. Perhaps the one notable action from the Eurogroup is that Juncker who has been the leader, with mixed reviews, including last week's gaffe about the euro, is stepping down. His likely replacement, the new Dutch Finance Minister Dijsselbloem, has been widely tipped.

A more pressing issue for investors is the implication of the repayment of LTRO funds by the banks starting next week. Speculation that it would tighten financial conditions saw euribor yields rise sharply. ECB's Coeure tried to calm market anxiety by indicating that he did not expect an impact on Eonia from the settlement. The implied yield of the March 13 Euribor futures contract has been trending higher since early December. The backing up in money market rates in Europe did not coincide with a stronger euro. We anticipate some stabilization in euribor in the days ahead, awaiting indications of the size of the repayments. Forecasts generally seem to range between 100-200 bln euros of the roughly trillion euros outstanding.

In addition, we draw your attention to the following events and data: Australia's Q4 CPI on Tuesday could sway expectations for the RBA meeting in early February. Presently there is about a 40% chance of a 25 bp rate cut discounted. Although the headline pace of inflation likely accelerated, the core rate appears stable and has not been an obstacle to easier RBA policy. The release of the BOE minutes will likely reaffirm market expectations that a resumption of QE is not imminent, even though the economy appears to have contracted in Q4 (first estimate released on Friday, Jan 25). Europe reports the flash PMI readings in Thurs. A critical issue is if Germany, which appears to have contracted in Q4, is in a recession (as defined by two consecutive quarters of contracting GDP (though note that technically, a recession in the US is determined by National Bureau of Economic Research and it uses a broader definition). I

In emerging markets, we note that the tone of Mexico's central bank statement was more dovish than expected before the weekend. It effectively removed any lingering threat of a hike, though we do not expect a rate cut either. Israel goes to the polls and barring a significant surprise, we do not expect much of a market reaction, though note that the dollar has found bids ahead of 1-year lows near ILS3.70. Three emerging market central banks meet this week, Turkey, the Philippines and South Africa. The only action we expect is a 25 bp rate cut by South Africa. The rand has been the weakest since the start of the year, losing 4.5% against the dollar, but many have their sights on the ZAR9.0, the high from October and again in November.

No sudden moves are expected today on the markets as investors worldwide will mainly focus on general news background.

­Russian markets are expected to open in the red despite having closed in positive territory on Friday. Two key Russian indices finished in the green, with the RTS gaining 1.14% and the MICEX up 1.10%.

Asian markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.23% and the Hang Seng rose 0.01%. The Nikkei 225 is closed for a holiday.

Oil prices slid on Monday, with Brent losing 0.27% and Light down 0.34%.

“Weak dynamics in Asian markets and a decline in world oil prices traditionally affect Russian stock exchanges, so I expect Russian indices to open with losse,” Yulia Voytovich of Investcafe explained.

However, European markets traded mixed. The FTSE 100 gained 0.36%, while the DAX dropped 0.43% and the CAC 40 lost 0.07%.

North and South American stocks also failed to show positive dynamics, but managed to finish mainly in green. The Dow Jones and the S&P 500 gained 0.39% and 0.34%, respectively, while the NASDAQ slid 0.04%.

“Today will not bring much in macroeconomic statistics, so no sudden moves on the markets are expected. Investors worldwide will mainly focus on general news background,” Voytovich said.

And the game continues as Speaker Boehner appears to be kicking the can across the corridor to the Senate (and implicitly the Democrats) as he quite specifically advises them that with no budget, there is no talk of debt-ceiling extensions. The principle is simple, he notes, "no budget, no pay." As Dow Jones reports, the 'compromise' deal is that the House will propose a three-month extension of the debt-ceiling in exchange for a budget (i.e. spending cuts from the Senate) - which of course is all but impossible given the years of inability to pass a budget anyway. Check to Obama (though we know the response)...

Following are excerpts of House Speaker John Boehner’s (R-OH) closing remarks as at the House Republican members retreat today, as prepared:

“Before there is any long-term debt limit increase, a budget should be passed that cuts spending. The Democratic-controlled Senate has failed to pass a budget for four years. That is a shameful run that needs to end, this year.

“We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem. The principle is simple: no budget, no pay. ...

“A long-term increase in the debt limit that is not preceded by meaningful and responsible reductions in government spending might avert a default, but it would also invite a downgrade of our nation’s credit that damages our economy, hurts families and small businesses, and destroys jobs.”

Via Dow Jones:

DJN - DJ U.S. HOUSE TO SEEK THREE-MONTH EXTENSION OF DEBT CEILING

DJN - DJ U.S. REP CANTOR: IF HOUSE AND SENATE DON'T PASS BUDGET IN 3 MONTHS LAWMAKERS WON'T GET PAID

* Former professional cyclist Lance Armstrong told the world Thursdayevening that he used performance-enhancing drugs to win seven Tour deFrance titles.

* Algeria's military launched a raid on Thursdayto free about 40 foreigners held by militants at a remote natural-gascomplex, leaving some hostages dead, surprising and angering severalgovernments and putting leaders across the world at a loss to determinethe fate of their citizens.

* In his final days as U.S. Treasurysecretary, Timothy Geithner reflected on the financial crisis and theresponse he helped craft, in an interview with The Wall Street Journal.Among other things, he said the government's rescue of the financialsystem was doomed to be unpopular.

* Rio Tinto Chief Executive Tom Albaneseagreed to step down on Thursday, the latest in a string of leaderstoppled by shifting fortunes at the world's biggest mining companies.

*Quarterly earnings reports released on Thursday underscore thelingering illnesses afflicting some of the largest, best-known U.S.banks and the comparatively ruddy health of some smaller regionallenders.

* Sony Corp has reached a deal to sell its U.S.headquarters at 550 Madison Avenue for $1.1 billion, the company said onThursday, a strong price that shows how investors are biddingaggressively for top Manhattan properties.

* Toyota Motor Corphas settled what was to be the first in a group of hundreds of pendingwrongful death and injury lawsuits involving sudden, unintendedacceleration by Toyota vehicles.

FT

In a drive for transparency, authorities in the Cayman Islands are planning on creating a public database of funds domiciled in the British territory for the first time.

Videogames seller Game Group is interested in acquiring stores from collapsed music retailer HMV, the CEO said.

As their mega-merger continues to go through regulatory clearance, Glencore and Xstrata are set to extend the deadline for the deal for a third time.

The British banking industry wants a deadline of May 2014 to be imposed for claims from customers who say they were mis-sold payment protection insurance, says one senior executive.

Barclays is considering whether it should recoup some or all of the 290 million pounds it was fined for Libor-rate rigging from the bonuses it is due to pay investment bankers in 2012.

NYT

* Hours after Algerian forces raided a gas facility, there was still no official word on the number of hostages freed, killed or still held by their Islamist kidnappers.

* In a televised interview with Oprah Winfrey, Lance Armstrong admitted to using banned substances but did not say how he did it or who helped him.

Thomas Weisel, who bankrolled Lance Armstrong through seven Tour de France wins, said in his first public comment on the matter that he never personally saw an instance of doping on the team.

* Most banks have recovered from the recent financial collapse, but two companies, Bank of America and Citigroup have reported continuing effects on earnings.

* AT&T warned that it would take a fourth-quarter charge of about $10 billion because of bigger-than-expected pension obligations.

* The Chinese economy picked up steam during the last few months of 2012, closely watched data from Beijing on Friday confirmed. But at the same time the figures underlined the view that the pace of future growth is likely to remain well below that seen in recent years.

* E*Trade Financial named Paul Idzik, a former executive at Barclays, as its new chief, ending a five-month search for a new leader.

* Norwegian Cruise Line Holdings has sold shares in itself at $19 apiece, a person briefed on the matter said, reaping about $446.5 million in proceeds.

Canada

CHINA SECURITIES JOURNAL

--The State Electricity Regulatory Commission of China (SERC) said China's power consumption could reach above 9 percent in 2013 from 5.5 percent in 2012.

--Fears over intellectual property lawsuits by foreign train technology companies will not derail exports of Chinese bullet trains, Vice Minister of Science and Technology Cao Jianlin said in an interview, dismissing copycat claims by Japan's Kawasaki as "nonsense."

--A former Japanese leader visited a memorial site to victims of Japanese wartime aggression, but analysts were quick to reject ay suggestion that Tokyo will change its policies toward China.

PEOPLE'S DAILY

--China's Railway Ministry said investment in railway could hit 650 billion yuan and that it will set a National Railway Development Fund as soon as possible.

China

THE GLOBE AND MAIL

* Two class action lawsuits were filed against the federal government in Canada after the human resources and skills development department lost a portable hard drive containing personal information about more than half a million people who took out student loans.

The department said last week the device contained data on 583,000 Canada Student Loans Program borrowers from 2000 to 2006.

* The federal ethics commissioner wants to talk to Finance Minister Jim Flaherty about his letter to the Canadian Radio-television and Telecommunications Commission (CRTC) after it was revealed that he wrote to the arm's-length broadcast regulator in support of a constituent's bid for a radio licence.

Reports in the business section:

* More Canadians went online to do their Christmas shopping this year, according to a new report by MasterCard Advisors.

Canadian consumers spent C$2.8 billion ($2.84 billion) shopping online in December, up 26 percent over the previous year and representing about 6.6 per cent of the month's total retail sales.

NATIONAL POST

* Three Quebec City teens have been arrested over charges of planning a shootout at their high school.

The three teens, two boys aged 14 and 15 and a 16 year old girl, who have pleaded not guilty, face charges of conspiracy to commit murder and will remain detained until a bail hearing on Monday.

FINANCIAL POST

* The blowout in price between Alberta's heavy oil and the North American benchmark price is a "longer term issue" with no quick fix, Alberta Investment Management Corp (AIMCo) CEO Leo de Bever said.

Fly On The Wall 7:00 Market Snapshot

ANALYST RESEARCH

Upgrades

Amazon.com (AMZN) upgraded to Outperform from Sector Perform at Pacific CrestCornerstone OnDemand (CSOD) upgraded to Buy from Neutral at GoldmanCredit Suisse (CS) upgraded to Overweight from Equal Weight at Morgan StanleyExpeditors (EXPD) upgraded to Outperform from Neutral at Credit SuisseFabrinet (FN) upgraded to Overweight from Neutral at JPMorganLas Vegas Sands (LVS) upgraded to Outperform from Market Perform at Wells FargoMovado (MOV) upgraded to Buy from Neutral at CitigroupNetflix (NFLX) upgraded to Buy from Neutral at Janney CapitalQlik Technologies (QLIK) upgraded to Buy from Neutral at GoldmanResearch in Motion (RIMM) upgraded to Buy from Hold at JefferiesTyson Foods (TSN) upgraded to Outperform from Market Perform at BMO CapitalWynn Resorts (WYNN) upgraded to Outperform from Market Perform at Wells Fargo

Downgrades

Alterra Capital (ALTE) downgraded to Neutral from Buy at Sterne AgeeBall Corp. (BLL) downgraded to Hold from Buy at JefferiesCSX (CSX) downgraded to Neutral from Outperform at Credit SuisseCapital One (COF) downgraded to Neutral from Buy at Janney CapitalCarrizo Oil & Gas (CRZO) downgraded to Underperform from Neutral at Credit SuisseClarcor (CLC) downgraded to Market Perform from Outperform at William BlairFinisar (FNSR) downgraded to Underperform from Hold at JefferiesMGM Resorts (MGM) downgraded to Market Perform from Outperform at Wells FargoNetSuite (N) downgraded to Neutral from Conviction Buy at GoldmanUltimate Software (ULTI) downgraded to Neutral from Buy at GoldmanVisa (V) downgraded to Neutral from Outperform at RW BairdWestamerica (WABC) downgraded to Underperform from Market Perform at BMO Capital

Initiations

Geron (GERN) initiated with an Overweight at Piper JaffrayHalcon Resources (HK) initiated with a Hold at Stifel NicolausHarry Winston (HWD) initiated with a Buy at NomuraInovio Pharma (INO) initiated with an Overweight at Piper JaffrayIntuitive Surgical (ISRG) initiated with a Buy at Janney CapitalMarathon Oil (MRO) initiated with a Buy at Stifel NicolausOncothyreon (ONTY) initiated with an Underweight at Piper JaffrayThreshold Pharmaceuticals (THLD) initiated with a Neutral at Piper JaffrayTronox (TROX) initiated with a Buy at B. Riley CarisZiopharm (ZIOP) initiated with a Neutral at Piper Jaffray

GE (GE) is the world's top producer of aircraft engines and medical-imaging equipment, but as far as its profits are concerned, it’s very much a bank. GE Capital is expected to account for nearly half the company's 2012 profit, the Wall Street Journal reportsDell’s (DELL) potential $23B leveraged buyout could also be the deal that finally gets the leveraged-buyout machine going again, showering financiers in fees and potentially yielding big returns for investors, the Wall Street Journal reportsAmericans are more confident in the future and are increasingly striking out to set up their own homes, a move that is helping propel the housing recovery, Reuters reportsWhen U.S. natural gas producers release their 2012 annual reports, many companies may have to significantly reduce a key indicator of their financial health: reserves. The SECrequires companies to calculate and report year-end oil and gas reserves using 12-month average prices, Reuters reportsWith the worst flu outbreak since 2009 gripping the U.S., vaccine makers (GSK, AZN) are determined to do better next season. They’re developing powerful vaccines that hold the promise of cutting incidences of flu by the thousands, Bloomberg reportsFranklin Templeton Investments (BEN) reduced its holdings of Apple (AAPL) last year to 4.2% from 7% in 2011 on concern the maker of the iPhone lacks a strategy to sell cheaper smartphones in emerging markets such as China and India, Bloomberg reports

Traders work on the floor of the New York Stock Exchange (NYSE) in New York.(AFP Photo / Stephen Chernin)

Russian indices are expected to make slight gains on Friday after macroeconomic data from the US and China inspired investors the previous day.

­

“[The] Friday trading session in Russia is most likely to show a mild growth. Given positive dynamics in Asian floors and a close of US trading in the ‘green zone,’ one could expect Russian markets to open in the black, with falling oil prices still pressing the indices,” Darya Pichugina of Investcafe wrote in an email.

On Thursday, both key Russian indices finished trading in positive territory. The RTS rose 0.91% to 1,585.44 and the MICEX was up 0.59% to 1,523.74. This upbeat sentiment came mostly on the back of positive statistics from the US, Pichugina added.

China reported better-than-expected economic growth for Q4 2012, with its GDP rising 7.9% during the period compared to a 7.4% growth in the previous quarter.

The number of new homes being built in the US in December rose sharply, according to official figures. Investors were also cheered by good news in the job market, where first-time claims for unemployment benefits fell to a five-year low last week. The declining number of unemployment claims sowed hopes that the world’s largest economy is gaining traction, CNN Money reported, quoting Chief Market Strategist Doug Roberts of Channel Capital Research.

Corporate earnings in the US offered a mixed picture, with Bank of America posting quarterly earnings slightly better that analysts had expected, while Citigroup fell short of expectations.

Asian markets have generally risen today, with Japanese shares leading the region. The Nikkei 225 is up 2.46%, while Hong Kong's Hang Seng added 0.75% and China's Shanghai Composite went up 0.56%.

The Dow Jones, the S&P 500 and the Nasdaq all rose more than 0.6%, with the S&P 500 closing at a five-year high.

European markets finished higher on Thursday with shares in France leading the region. The CAC 40 is up 0.96%, while Germany's DAX is up 0.58% and London's FTSE 100 is up 0.46%.

Global floors remain sluggish as traders register disappointment with the World Bank’s forecast of weaker-than-expected economic growth in 2013, and as US debt ceiling negotiations draw nearer.

Russian indices are expected to produce another day of slow trading on Thursday, as uncertainty prevails on international floors, according to Darya Pichugina of Investcafe. Russian stocks traded mixed Wednesday, with the RTS declining 0.34% to 1,571.15, and the MICEX rising 0.12% to 1,516.67.

Asian floors also began Thursday trading with mixed sentiments: The Nikkei has gained 0.15% and the Shanghai Composite has gone down 0.78%, Pichugina added.

The debate over the US debt ceiling is heating up as Washington is expected to reach its borrowing limit in February. Should the country fail to resolve the issue, the world’s largest economy could default, Fed chief Ben Bernanke and US Treasury Secretary Timothy Geithner have warned.

The debt ceiling is expected to dominate investor attention after the reporting period in the US concludes, J.J. Kinahan, chief derivatives strategist at TD Ameritrade, told CNN Money.

"We may have a bit of a pause after earnings season ends and we head into debt ceiling negotiations," Kinahan said. "That's when you might see people start to hold back. For now, people are trading earnings as if it's a normal market."

The World Bank report was another point of concern for investors, as the Washington-based bank projected that the world economy would expand 2.4% in 2013, down from a June forecast of 3%, after growing 2.3% in 2012. The lowered expectations are due largely to austerity measures, high unemployment and low business confidence weighing down economies in developed nations, the World Bank said.

“Doubts have been growing that the strength in equities can be sustained as fears of the outlook for the global economy re-emerged after the World Bank downgraded its forecast for global GDP leading to some investors banking recent profits,” Angus Campbell, Head of Market Analysis at Capital Spreads, wrote in an email.

On Wall Street, the Dow Jones fell 0.2% on Wednesday, with Boeing leading the decline. The S&P 500 closed almost flat, while the Nasdaq gained 0.2%. Boeing shares fell 3.4% as its ‘Dreamliner’ jet continued to disappoint. Two Japanese airlines grounded their fleets of the 787 aircraft after one of All Nippon Airways' Dreamliners had to make an emergency landing.

European markets traded mixed as of the most recent closing prices. The CAC 40 gained 0.30% and the DAX rose 0.20%, while the FTSE 100 lost 0.22%.

Those who went long Boeing in the last few days on hopes the "smoking battery" issue had been resolved, especially following Ray LaHood comment's he would fly the Dreamliner, which is rapidly becoming the Nightmareliner for Boeing, anytime anywhere, are about to be grounded, as is the entire 787 fleet of All Nippon Airlines and Japan Airlines following yet another incident forcing an emergency Dreamliner landing. This happened after ANA "alarms indicated smoke in the forward area of the plane, which houses batteries and other equipment, the airline said, and there was a "burning-like smell" in the cockpit and parts of the cabin. The plane landed at Takamatsu airport in western Japan, where the 129 passengers were evacuated using the plane's emergency chutes. The plane also carried eight crew members. ANA said that the exact cause was still undetermined. The event was designated as a "serious incident" by Japan's transport ministry, setting off an immediate investigation by the Japan Transport Safety Board, which dispatched a team to the scene." The result - a 4% drop in the stock so far premarket, and if any more airlines are to ground their fleet the implications for the backlog could be devastating, it will only get far worse for both the company and the Dow Jones average, of which it is part.

Elsewhere, as we already reported, Germany cut its 2013 growth outlook to 0.4%, down from 0.7% in 2012. However, while Juncker yesterday launched the first shot of verbal intervention in an attempt to keep German exports strong, today ECB's Nowotny confirmed that the confusion in Europe is as prevalent as ever, following remarks that the "panic in markets over the EUR is over, and the exchange rate is not a matter of major concern", which pushed the EURUSD higher by some 50 pips. While these remarks directly negated Juncker's, they also made sure that the export-growth driven Germany's recession is here to stay as every yard higher in the EURUSD means, several German GDP ends up several ticks lower. Pick your poison.

In other news the earnings season revs up a gear today as JPMorgan and Goldman Sachs kick off the reporting season for the US investment banks (before US market open). This should set the tone for the rest of the banking sector who report over the following few days including Bank of America and Citigroup tomorrow and Morgan Stanley on Friday. For the record, the market is expecting EPS of $1.22 and $3.66 for JPM and GS respectively. Importantly though, in recent months Q4 expectations themselves have been raised by around 7% and 18% for JPM and GS respectively, according to Bloomberg data. Indeed, expectations for the broader financial sector as a whole are high, with the financials industry sector rallying more than 13% since the lows in mid-November (vs a 8.7% gain for the broader S&P500).

Deutsche Bank's recap continues: In terms of yesterday’s US session, it was a day of two halves as a weaker-than-expected Empire Manufacturing print (-7.8 vs 0.0 expected) and another 3% drop in Apple set the scene for a weak open. From there, the S&P500 managed a 0.6% intraday rally to close with a gain of 0.11%, taking the benchmark to a new postfinancial crisis high of 1472. Driving the rally was a better than expected retail sales number (+0.5% vs +0.2% expected) which as our US economists point out, came amidst a recent spate of weaker consumer sentiment indicators including the UofMichigan (72.9 Dec vs. 82.6 Oct) and Conference board surveys (65.1 Dec vs. 73.1 Oct). Indeed retail stocks (+0.75%) outperformed on the day led by JC Penney (+3.4%), Tiffany’s (+3.3%) and Macy’s (+2.2%) – helping to offset another weak day for telecoms (-0.9%) and technology stocks (-0.6%). While on the topic of technology, Apple had its second consecutive day of +3% losses. Its stock price closed below $500/share for the first time since February 10th 2012 and is now about 31% below the all-time peak of $702 reached in mid-September 2012.

Across the Atlantic, the head of Fitch’s sovereign ratings team reiterated that another last minute US budget deal isn't consistent with a AAA rating, and the "self inflicted crisis" will put into question the predictability and reliability of US fiscal policy. The agency also said that the risks of the UK losing its AAA rating are increasing, adding that the Treasury's Autumn Statement that it would miss its 2015-16 target to start cutting the level of net debt had weakened the Treasury's "credibility".

In an interview in the FT, PM Rajoy said that his government’s reform programme will begin to bear fruit in the form of an economic recovery later this year, and will “come through very clearly in 2014”. Rajoy also called for expansionist policies from countries that could afford it, probably referring to Germany. Mr Rajoy also insisted that Spain was right not to request aid from the ECB last year - and ruled out any such move for the time being. Mr Rajoy suggested he would only consider OMT in the event of fresh market turmoil. "The option is there, and it would be absurd to rule it out for all time," the PM said. (FT) Turning to overnight markets, most Asian markets are trading with a weaker tone paced by losses on the Hang Seng (-0.22%) and Shanghai Composite (-0.56%).

The Nikkei (-2%) is underperforming broader regional markets, despite better than expected November machine orders (+3.9%mom vs +0.3% expected), partly driven by profit taking following four straight sessions of gains. The JPY is continuing to strengthen across the board following comments on the newswires from the LDP’s Secretary General that a weaker JPY may be of concern for some industries. Staying in Japan, the Nikkei reported that the Abe government will present successors to BoJ Governor Shirakawa and his two deputies around February 15th.

In other interesting headlines, the EU’s Jean-Claude Juncker said that Euro’s recent rise against major currencies had resulted in an exchange rate that was “dangerously high”. The comment drove a late selloff in EURUSD (-0.57%) yesterday, although it remains about 1.7% higher than before the ECB’s meeting last Thursday. On the topic of central banks, Boston Fed President Rosengren said that the Fed could enlarge asset purchases if it were to become necessary. He highlighted that the Fed would want to see about a 0.5ppt drop in unemployment before it would begin to decide whether to halt purchases.

Turning to the day ahead, the German government is expected to publish its annual economic report that is reported to revise down the country’s 2013 growth estimate to 0.5% from a previous estimate of 1% (Reuters). Eurozone CPI, Italian trade data for November and a German 10yr bund auction are the other highlights of today’s European calendar. In the US, December CPI, industrial production, the Fed’s beige book and the NAHB housing market index are the main data releases. But all eyes will be on the JPM and GS results which are due at 12 noon and 12:30pm London time respectively.

Global investors are expected to hold off on major action until corporate reports from the US give an indication of the state of the world’s largest economy. Uncertainty around the US debt ceiling has added to an overall market malaise.

“In the near future they expect quarterly reports of American banks to be released, with their success now likely to become the only notable growth stimulus. And so far a Russian market seems to freeze up pending developments on global floors,” Liliya Brueva of Investcafe wrote in an email to RT.

Russian stocks closed mixed after Tuesday’s session: The RTS lost 0.86% to end at 1,576.54, and the MICEX climbed 0.11% to 1,516.92.

International investors generally held off on big moves until a clearer picture emerges of US corporate profits. Goldman Sachs and JPMorgan Chase will report their results Wednesday, while Intel, Bank of America and General Electric are due later in the week.

The unresolved issue of raising the US debt ceiling is another source of investor uncertainty. Fed chief Ben Bernanke and US Treasury Secretary Timothy Geithner offered sharp commentaries on the issue; Geithner argued that unless the debt ceiling is raised, the US may default on its debts as early as the end of February, Brueva said.

“If you thought the US fiscal cliff worries were over think again, as markets were shrouded in more uncertainty about the outcome of future negotiations in respect of the US debt ceiling,” said Angus Campbell, head of market analysis at Capital Spreads.

The Dow Jones Industrial Average and S&P 500 closed up between 0.1% and 0.2% on Tuesday. The Nasdaq dipped 0.2%.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York.(AFP Photo / Stephen Chernin)

Russian markets are expected to react sharply to comments by US Federal Reserve Chair Ben Bernanke, while gains in China are likely to boost indices.

­Russian indices moved higher Monday, supported by strong corporate results in the retail and resource sectors. The MICEX and the RTS both jumped 1.2%.

European stock markets closed in the red Monday as investors awaited a speech by US Fed Chief Ben Bernanke on the country’s monetary policy. The Stoxx Europe 600 fell 0.4% and the German DAX 30 rose 0.2%, led by gains of chemicals group BASF SE. The French CAC 40 rose 0.1%, supported by banking.

US stocks closed mostly lower on Monday after Apple announced a cut in iPhone production. Bernanke’s pledge that the Fed’s easing policy has a low risk of inflation also failed to cheer investors. The Dow Jones itched 0.1%, the S&P 500 shed less than 0.1% and the Nasdaq Composite lost 0.3%. Shares of Apple fell 3.6% in a $17bn selloff after the WSJ reported that LCD panel producers cut output for Apple amid slower-than-expected global sales of the iPhone 5.

Asian stocks traded mixed Tuesday, supported by Japanese gains on the weaker yen; losses by Apple also hit the tech sector. Japan’s Nikkei rose 0.7% to its highest level since the end of April 2010. Hong Kong’s Hang Seng Index shed 0.3% and the Shanghai Composite added 0.4%, extending gains on speculation that mainland China would open stock markets to foreign investors. Australia’s S&P/ASX 200 declined 0.3%, and South Korea’s Kospi shed 0.9%.

Russian stocks, back to normal trading schedule after New Year holidays, are expected to be looking westward for good news. That’s after the country’s key indices went up on Tuesday, upbeat about developments over the ‘fiscal cliff’ issue.

The November index for industrial production in Germany will become the most important market driver on Wednesday, Grigory Birg of Investcafe told RT via email. The indicator lost 2.6% in October, with a further decline likely to have a negative impact on a share market.

Tuesday marked the first working day for Russian floors in 2013 after a 10–day pause for traditional New Year celebrations. Both the RTS and the MICEX had a good start to the year, rising 3.22% and 2.72% respectively. This is because the floors were winning back the news that the US has so far managed to escape the fiscal cliff.

In the early hours of 2013, US politicians finally agreed a deal on tax and spending, stipulating raising income tax for individuals making $400,000 and coupling earning $450,000 from 35% to 39.6%, as well as permanently extending Bush-era tax cuts for those earning less than $400,000 annually.

On top of that, the legislation proposes a one-year extension on unemployment insurance benefits, which are about to expire for 2 million people. The bill doesn’t include any cuts to entitlement programs such as social security or Medicare. It also does not tackle the issue of raising the debt ceiling from the current limit of $16.4 trillion, which the US is about to cross. At present, the US national debt stands at $16.438 trillion.

In the US, the stocks were in the red for the second consecutive day on Tuesday. That’s at a time when aluminum giant Alcoa opened a reporting season for corporate America with better-than-expected quarterly results. The company reported sales of $5.9 billion in Q4, above analysts' estimates of a drop to $5.6 billion. The Dow Jones Industrial Average, S&P 500, and Nasdaq closed down between 0.2% and 0.4%, bouncing back from steeper declines ahead of the close.

European markets finished mixed as of the most recent closing prices. The CAC 40 gained 0.03%, while the DAX led the FTSE 100 lower. They fell 0.48% and 0.18% respectively.

Asian markets were mixed on Tuesday. The Nikkei 225 was up 0.89% while the Hang Seng gained 0.36% and the Shanghai Composite lost 0.03%.

Russian stocks, back to normal trading schedule after New Year holidays, are expected to be looking westward for good news. That’s after the country’s key indices went up on Tuesday, upbeat about developments over the ‘fiscal cliff’ issue.

The November index for industrial production in Germany will become the most important market driver on Wednesday, Grigory Birg of Investcafe told RT via email. The indicator lost 2.6% in October, with a further decline likely to have a negative impact on a share market.

Tuesday marked the first working day for Russian floors in 2013 after a 10–day pause for traditional New Year celebrations. Both the RTS and the MICEX had a good start to the year, rising 3.22% and 2.72% respectively. This is because the floors were winning back the news that the US has so far managed to escape the fiscal cliff.

In the early hours of 2013, US politicians finally agreed a deal on tax and spending, stipulating raising income tax for individuals making $400,000 and coupling earning $450,000 from 35% to 39.6%, as well as permanently extending Bush-era tax cuts for those earning less than $400,000 annually.

On top of that, the legislation proposes a one-year extension on unemployment insurance benefits, which are about to expire for 2 million people. The bill doesn’t include any cuts to entitlement programs such as social security or Medicare. It also does not tackle the issue of raising the debt ceiling from the current limit of $16.4 trillion, which the US is about to cross. At present, the US national debt stands at $16.438 trillion.

In the US, the stocks were in the red for the second consecutive day on Tuesday. That’s at a time when aluminum giant Alcoa opened a reporting season for corporate America with better-than-expected quarterly results. The company reported sales of $5.9 billion in Q4, above analysts' estimates of a drop to $5.6 billion. The Dow Jones Industrial Average, S&P 500, and Nasdaq closed down between 0.2% and 0.4%, bouncing back from steeper declines ahead of the close.

European markets finished mixed as of the most recent closing prices. The CAC 40 gained 0.03%, while the DAX led the FTSE 100 lower. They fell 0.48% and 0.18% respectively.

Asian markets were mixed on Tuesday. The Nikkei 225 was up 0.89% while the Hang Seng gained 0.36% and the Shanghai Composite lost 0.03%.

Mid September marked the fourth anniversary of the Lehman Brothers bankruptcy, widely viewed as the final trigger of the global economic collapse, a shock that remains the dominant factor in global economic life. Friday, October 19 brought a dramatic drop in US equity values, caused, commentators speculate, by dismal reports of US corporate earnings. The most observant of these commentators did not fail to point out that Friday was also the twenty-fifth anniversary of the largest US one-day percentage drop in stock values. The fact that such an anniversary came to mind reflects a general and widespread fear that more economic turbulence is forthcoming.

The growing gloom overshadows the glowing September report of retail sales released earlier in the week. Despite stagnant or slipping incomes, the US consumer turned to the credit card to boost purchases at retail stores, online, and in restaurants. Signs of an improving housing market also fueled optimism.

Opinions change quickly. A week earlier---Tuesday, October 9---the International Monetary Fund released its World Economic Report. While raising fears of a global downturn, the report cut the probability of a US recession by nearly a quarter from its April forecast!

Taken together, the sentiments of the last two weeks demonstrate widespread confusion and uncertainty.

Big Problems, Little Ideas

Most of the conversation about the global economy, about capitalism, is shaped by ideological bias, academic dogma, distorted history and wishful thinking.

The global economy has never “recovered” from the shock of 2008. Nor does it teeter on the edge of another recession. In fact, it is fully in the grip of a profound systemic crisis, a crisis that has no certain conclusion. In this regard, the crisis is very much like its antecedent in the 1930s. The popular picture of The Great Depression as a massive collapse followed by the New Deal recovery is myth. Instead, like our current economic fortunes, it was like climbing a metaphorical grease pole— repeatedly advancing a few feet and then slipping down. Serious students of the Great Depression understand that its “solution” was World War II, with its state-driven, planned, military “socialism.”

Of course war itself is no solution, but the organized, collective, and social effort that capitalism only countenances for violence and aggressionis a solution. Similarly, the success of the People’s Republic of China in sidestepping the harsh edges of the 2008 collapse is due to the remaining features of socialism—public ownership of banks, state enterprises, and economic planning. Never mind that much of the PRC leadership hopes to jettison these features, the advantages are there for all to see. Yet few see.

Distorted history begets foolish theory. The two ideological poles that dominate economic discussion—classical liberalism and Keynesianism—both owe their claimed legitimacy to favored, but mistaken views of the source and solution to the Great Depression. While expressions of these poles are found across the political policy spectrum, classical liberalism—often called neo-liberalism—is generally associated with the political right.

Political liberals and the left, on the other hand, often advocate for the analyses and prescriptions of the school associated with the views of John Maynard Keynes.

Since classical liberalism has been the dominant economic philosophy governing the global economy for many decades, common sense would dictate that, after four years of economic chaos and general immiseration, neo-liberalism would be in disrepute. But thanks to the tenacity of ruling elites and the profound dogmatism of their intellectual lackeys, the market fetish of neo-liberalism still reigns outside of Latin America and a few other outliers.

But Keynesianism—broadly understood as central government intervention in markets—enjoys a growing advocacy, particularly with liberals, leftists, and, sadly, “Marxists.” Centrist Keynesians advocate intervention in markets from the supply side, most often through credit mechanisms and tax cuts that encourage investment and corporate confidence. Liberal and left interventionists argue for stimulating economic recovery and stability by generating consumption and expanding demand from government-funded projects or government-funded jobs.

The panic of 2008 turned most policy makers toward flirtation with supply-side intervention and generally meager demand-based stimulus, a fact that liberal Keynesians like Paul Krugman are fond of pointing out. Only China adopted a full-blown demand-oriented stimulus program. Yet that tact also brought a host of new contradictions in its wake.

Austerity versus Growth

Pundits like Krugman and politicians like Francois Hollande posture the theoretical divide as one between austerity and growth, a choice between rational growth stimulation and the irrationality of shrinking government spending to reduce debt. In an idealized classless world, this point would be well taken—austerity is an enemy of growth. However, it is naïve and misleading to fantasize such a world.

In our era of global capitalism, the idea of cutting government spending and lowering taxes makes all the sense in the world to the ownership class. The resultant transfer of value counts as a significant element in restoring profit growth and expanding accumulation. In a real sense, the popular and apt anti-austerity slogan-- “we will not pay for your crisis”-- tells only half the story. The other half should be “we will not pay for your recovery.”

In the end, it is profit that determines the success and failure of the capitalist system. Accumulation of economic surplus—the value remaining after the bills are paid--is the engine of capitalism, necessary for its motion and its trajectory. The dramatic drop in the Dow Jones industrial stock averages resulting from poor earnings this past Friday only underscores this point. Those who see consumption as the critical element in growth and recovery should recognize that this loss of momentum is independent of, as well as more decisive than, the September report of strong retail demand.

The Tendency of the Falling Rate of Profit

The central role of profit, its growth and momentum in understanding capitalism and its recurrent structural crises has been overshadowed, even among most Marxists, by the infection of left thought with Keynes’ crisis theory. Theories of crisis that rest on underconsumption, overproduction, or imbalances reflect this infection and reduce political economy to the study of business cycles and avoidable and terminable economic hiccups—consumption can be expanded, production can be regulated, and balance can be restored. These are the assumptions of social democratic theory and what divides it from revolutionary Marxism.

Marx saw crisis as fundamentally embedded in capitalism’s structure. Processes in the capitalist mode of production unerringly bring on crises. And he locates the most basic of these processes is the mechanism of accumulation, a process that tends to restrain the growth of the rate of profit.

While it is good to see a rebirth of interest in and advocacy of Marx's law of the tendency for the rate of profit to fall, most of its worthy supporters remain needlessly confined to Marx’s expository formulae that serve well in revealing the anatomy of capitalism, but less so in exposing its disorders.

Yet the intuition behind Marx’s law is easily grasped. When unmediated by the encroachment of working class forces, the capitalists’ accumulation of surplus results in the extreme concentration of wealth, a concentration that reduces the opportunities to gather the expected return in the next and each successive cycle. Whether restrained by the physical limitations of workers, the potential length of the work day, diminished return on physical investment, rapacious competition, super-inflated investment reserves, or the myriad other possible forces or factors, the rate of profit is under constant and persistent duress.

Leading up to the 2007 economic slowdown that presaged the 2008 collapse, the enormous pool of capital available for profitable investment was acknowledged by all reporters. Its sheer volume alone depressed interest and profit rates in the face of limited productive investment opportunities. The desperate search for a rate of return drove investors toward riskier and riskier ventures that generated the financial collapse which has been well documented. It was the pressure on profits—an expression of the tendency—that drove the investor class to a lemming-like indulgence in arcane financial wizardry.

The neglect of Marx’s tendential law since the popularity of Keynes and underconsumption/overproduction crisis theories has retarded Marxist and Communist understanding of capitalist crisis while bolstering reformist policies within the Communist movement. Happily, there is a renewed interest in Marx’s law, though a full and satisfactory understanding of its application to and operation within contemporary capitalism is yet to be given.

At any rate, the decline of earnings now emerging in the latest financial news indicates that counter-crisis and counter-tendency measures are now exhausted in the US. Despite the euphoria of rising consumption spending and housing sales, the profit-driven engine of US capitalism is slowing, likely allowing the US economy to drift closer to the whirlpool already drowning the European economies.

Tough times are ahead, but a fertile period to plant the seeds of socialism.

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